20220516-招银国际-Chinese_properties__Incremental_supportive_measures_on_sector_3页_422kb

CMBI Credit Commentary Summary

Core Content

The CMBI Credit Commentary provides an analysis of the Chinese property sector, focusing on recent monetary policy adjustments, property sales trends, and the role of CRMW (Credit Risk Mitigation Warehouse) in improving access to onshore bond markets. It also includes author certifications, important disclosures, and disclaimers for different regions.

Main Points

1. Monetary Policy Adjustment

• On 14 May, the PBOC (People's Bank of China) announced a 20bps cut in the mortgage rate floor for first-time homebuyers.
• The new minimum mortgage rate for first homes is set at 4.4%, based on the 5-year LPR (Loan Prime Rate) of 4.6%.
• The cut is viewed as mildly positive for sentiment but unlikely to reverse the weakened trend in property sales.
• The commentary suggests that more drastic monetary policy relaxation is unlikely due to concerns over capital outflow and the weakening RMB amid the US Fed's tightening cycle.
• CMBI believes a mild LPR cut (10-20bps) is still possible.

2. Property Sales Decline

• Contract sales for 36 developers under CMBI's radar declined by 47% year-over-year (yoy) in April 2022.
• Sales dropped by 23.6% month-over-month (mom) from March 2022.
• Distressed developers experienced significant sales deterioration:
  • SINHLD: RMB1.3bn, -96% yoy
  • DAFAPG: RMB2.9bn, -82% yoy
• Outperformers include:
  • YUEXIU: RMB26.4bn, -20% yoy
  • CRHZCH: RMB76.3bn, -25% yoy
  • SINOCE: RMB21.9bn, -28% yoy

3. CRMW and Bond Market Access

• The Chinese regulator supports the use of CRMW (a local version of CDS) to improve developers' access to onshore bond markets.
• Country Garden, Longfor, and Media Real Estate are selected as pioneers for this initiative.
• CRMW is a tool that can help higher credit quality developers gain better access to capital, but its widespread impact is expected to take time.
• CRMW was first introduced in 2018, and as of now, outstanding CRMW covers less than 1% of onshore bonds.

Key Information

• Mortgage Rate Floor Cut: 20bps for first-time homebuyers.
• Sales Performance: Sharp decline in contract sales for the sector in April 2022.
• Distressed Developers: SINHLD and DAFAPG showed severe sales drops.
• CRMW Impact: Limited so far, but expected to enhance access for creditworthy developers over time.
• Monetary Policy Outlook: CMBI anticipates a mild LPR cut but not a significant one.

Author Information

• Glenn Ko, CFA (高志和)

  • Email: glennko@cmbi.com.hk
  • Tel: (852) 3657 6235

• James Wen (温展俊)

  • Email: jameswen@cmbi.com.hk
  • Tel: (852) 3757 6291

• Polly Ng (吴宝玲)

  • Email: pollyng@cmbi.com.hk
  • Tel: (852) 3657 6234

Contact Information

• CMBI Fixed Income
• CMB International Securities Limited
• Fixed Income Department
• Tel: 852 3761 8867 / 852 3657 6291
• Email: fis@cmbi.com.hk

Disclaimer and Legal Information

• Author Certification: The author certifies that the views expressed in the report reflect their personal views and are not influenced by compensation.
• Trading Restrictions: The author has not traded in the stocks covered in the report within 30 days prior to the report's issue, and will not do so within 3 business days after the issue.
• Important Disclosures:
  • The report is not investment advice and not suitable for all investors.
  • Past performance does not guarantee future results.
  • CMBIS is not liable for any losses incurred from reliance on the report.
  • The report is intended for internal use and may not be reproduced or distributed without prior written consent.

Regional Restrictions

• United Kingdom: Report is provided only to persons falling within Article 19(5) or Article 49(2)(a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
• United States: Report is for distribution to major US institutional investors only and is not subject to US regulatory requirements.
• Singapore: Distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser regulated by the MAS. Legal responsibility is limited to what is required by law for non-accredited investors. Contact: +65 6350 4400.