Date
21 September 2017
Excessive leverage and economic slowdown have led to troubles for some Chinese property developers. Photo: Bloomberg
Excessive leverage and economic slowdown have led to troubles for some Chinese property developers. Photo: Bloomberg

China property bears expect more defaults after Kaisa

China could see more debt defaults by property developers as the heavily leveraged and oversupplied sector goes through a consolidation process, according to some observers.

The troubles at Shenzhen-based developer Kaisa Group, which last week missed interest payment on some offshore bonds, reflect a broader malaise in the industry, experts told Financial Times.

“I’m not at all surprised by this incident,” Chi Lo, Greater China economist at BNP Paribas Investment Partners, was quoted as saying, referring to the Kaisa default.

“With the [Chinese] economy slowing and government policy direction changing, we expect [property sector] consolidation to continue. This incident is part of the consolidation process.”

However, others consider Kaisa an isolated event with political undertones that offers little insight into the sector’s true health, the report said.

Ultimately, how Kaisa’s malaise is resolved will be key in determining whether this proves an unwelcome blip or something more sinister for investors, it said. 

Since the start of 2012, mainland property companies are said to have borrowed more than US$65 billion in international bond and syndicated loan markets.

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FL/RC

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