(Yicai Global) April 7 -- Chinese real estate firms' sales of new bonds both at home and abroad slumped 43 percent in the first quarter from the same period last year, as market confidence dips amid recurring outbreaks of Covid-19 and ongoing geopolitical tensions and as supportive policies are yet to take effect.

Chinese developers raised CNY173.3 billion (USD27.2 billion) through bond issuance in the three months ended March 31, and the decline was widened by 20 percentage points compared to the same period last year, Securities Daily reported today, citing data from the Ke Research Institute. 

One hundred developers raised CNY205.5 billion (USD32.3 billion) in the first quarter, down 52.5 percent from a year earlier, the report said, citing incomplete statistics from the CRIC Research Center. The big drop is mainly due to the large base number last year, it added.

Out of the 123 Chinese yuan-denominated bonds issued, 94 percent were by state-owned or central enterprises, indicating that government-backed firms have solid credit endorsement, are more recognized by the market and can command better rates, the Beijing-based Ke Institute said.

The coupon rate of yuan bonds was 3.65 percent in the first quarter, down 112 basis points from a year ago, it added.

In the first quarter, only a few developers issued bonds for mergers and acquisitions and although the amount is not large yet it has limited impact on the overall scale of bonds issued by the real estate sector, the China Index Academy said.

The credit environment is getting worse and many real estate companies still have high debt levels, said the Ke Institute, which is the research arm of China’s biggest online real estate agent Ke Holdings. It will take time for the government’s supportive policies to take effect.

Real estate firms are changing their business patterns and are moving away from the heavy leverage model of developing, the institute said. Those companies that wish to become financially sound will cut their debts, it added.

Mature companies are prudent and will guard against credit and liquidity risks, so the financing amount will recover slowly but is likely to remain low in the short term, the CRIC Research Center said.

Editor: Kim Taylor