Credit profiles of China's property developers improved

Moody's Investors Service said in a report on Tuesday that the credit profiles of many of its rated developers have improved because of their sales growth and better liquidity positions.

"Since November 2012, Moody's has taken nine positive rating actions and only one negative action in its rated portfolio. The number of companies with negative rating outlooks fell to 9 as of Jan 25, from 12 at end-2012 and the peak of 17 in May 2012," said Kaven Tsang, vice-president and senior analyst at the agency.

In addition, rated developers have been actively raising funds from offshore capital markets. As of Jan 25, 11 rated developers had raised funds through the issuance of senior unsecured bonds, while two rated developers had issued hybrids or equity.

"These fundraising activities are generally credit positive because they support the liquidity levels necessary for developers to sustain their business operations and improve their debt maturity profiles, while maintaining overall leverage at levels appropriate for their ratings," Tsang said.

The Moody's Liquidity Index for Chinese property developers — which measures the number of rated developers that have weak liquidity positions — was unchanged in December 2012, after improving slightly in November. The index stood at 29 percent in December, versus its peak of 31 percent in October.

"We expect the index to improve moderately in the near term, as many Chinese developers, including those with low ratings, have taken advantage of the ample liquidity in the market currently to issue long-term US dollar bonds to refinance their short-term debt and to extend their debt maturity profiles," Tsang added.

Most rated developers also recorded robust contract sales in 2012. Of the 15 property companies that Moody's tracks, 14 either met or exceeded their targets for all of 2012.

Moody's expects the contract sales of mainland property companies to maintain year-on-year growth in the first quarter of fiscal 2013.