Quote | Super Quote
Super Quote   |   Detail Quote   |   Interactive Chart   |   Transaction   |   Related News   |   Related Securities   |   Company Information   |   Dividend Records   |   Short Sell
RTNominal down9.950 -0.090 (-0.896%)
Research Report

19/10/2020 17:23

New debt-control measures improve developers' credit quality

[ET Net News Agency, 19 October 2020] China's new measures to control debt growth, if
implemented, will improve property developers' credit quality over the next 2-3 years by
limiting the use of debt to fund business growth, which will effectively put a lid on
highly geared developers' leverage buildup, according to a new report by Moody's Investors
"That said, the measures specifically target raising new debt and therefore should not
affect developers' ability to raise debt for refinancing," said Kaven Tsang, a Moody's
Senior Vice President.
"And while developers with high leverage will be restricted from debt-led growth,
financially healthy developers with low leverage and strong liquidity will still have
flexibility to raise debt to fund growth, allowing them to acquire market share from their
weaker peers," added Tsang.
According to media reports, developers will be tested on three financial parameters:
liability to asset ratio (debt leverage); net debt to equity ratio (capital structure);
and cash to short-term debt ratio (liquidity). Their ability to raise new debt will be
dependent on the result of the test.
Developers' annual debt growth would be limited to a maximum of 15% if they do not
breach any parameter. A breach of one parameter would result in a reduction of the growth
rate by 5 percentage points.
Per Moody's test scenarios, most rated developers will continue to be able to raise new
debt, albeit at a slower pace. Rated developers should have the flexibility to grow their
debt by 5%-10% in the next 12 months under the strict scenario if the new policy has
strict limits, or by 15% if the guidelines are looser.
Nevertheless, Moody's expects rated developers' reported debt growth will slow to 5%-10%
in 2021, down from the 15%-25% growth in 2018 and 2019. This forecast mainly comes with
the acknowledgment that economic recovery is tenuous and property sales growth will remain
modest over the next 12-18 months. (KL)

Remark: Real time quote last updated: 15/01/2021 17:59
  Real-time basic market prices of Hong Kong securities are provided by HKEx; a Designated Website authorized by the HKEx Group to provide the Service
A Member of HKET Holdings
Customer Service Hotline:(852) 2880 7004     Customer Service Email:cs@etnet.com.hk
Copyright 2021 ET Net Limited. http://www.etnet.com.hk ET Net Limited, HKEx Information Services Limited, its Holding Companies and/or any Subsidiaries of such holding companies, and Third Party Information Providers endeavour to ensure the availability, completeness, timeliness, accuracy and reliability of the information provided but do not guarantee its availability, completeness, timeliness, accuracy or reliability and accept no liability (whether in tort or contract or otherwise) any loss or damage arising directly or indirectly from any inaccuracies, interruption, incompleteness, delay, omissions, or any decision made or action taken by you or any third party in reliance upon the information provided. The quotes, charts, commentaries and buy/sell ratings on this website should be used as references only with your own discretion. ET Net Limited is not soliciting any subscriber or site visitor to execute any trade. Any trades executed following the commentaries and buy/sell ratings on this website are taken at your own risk for your own account.