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China Property: Singapore & HK Investor Meetings
Sandra Chow, CFA – Co-Head of Asia-Pacific Research
Nicholas Chen – Analyst - Chinese Corporates
Luther Chai, CFA – Senior Analyst - Chinese Corporates
Nicole Chua – Analyst - Chinese Corporates
EXECUTIVE SUMMARY
- Our China property analysts spoke to a range of Singapore and Hong Kong-based clients last month, including investors from the asset management, private banking and insurance sectors.
- China property remains a hot topic even though many investors have pared back their exposure. Few have exited the sector completely and the property sector’s role in shaping China’s economic growth outlook and policies makes it core to any discussion about Asia credit.
- There was strong interest in “yieldy” performing but still risky developers, such as Country Garden, Longfor, China SCE and Agile. Most agreed that the sector will eventually become dominated by large state-owned developers such as China Overseas Land and China Resources Land, but believed spreads for these names were too tight to offer value at present.
- Most remained pessimistic on the long-term outlook for weaker developers. Evergrande’s restructuring proposal met with much eye-rolling and a few investors questioned why developers even bothered restructuring their offshore debt, instead of simply liquidating.
RELATIVE VALUE
1. Keen interest despite light positions
China property remains a hot topic for discussion, even though most investors we spoke to had pared back much of their exposure last year, or even earlier. Most investors still had some positions in the sector, either because they still saw some decent investment opportunities, or because they were stuck in legacy distressed positions. At a broader level, the importance of the property sector in driving China’s economic outlook and government policies, as well as its (albeit deeply diminished) weighting within the Asian credit index also made the sector core to any discussion about Asia credit. Many, both investors and the Chinese developers, still view the China property sector as a key industry for China’s economy.
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