Events
On May 16, the regulators selected three private housing enterprises, Longhu, country garden and Midea real estate, to issue RMB bonds successively from this week, and the founding institutions will also issue credit protection tools including credit default swaps (private CDs) or credit risk mitigation certificates (crmw), so as to help private real estate enterprises gradually restore the financing function of the open market.
Main points
In the early stage, actively explore the financing difficulties of private housing enterprises. In November 2021, Bank Of China Limited(601988) inter market dealers association held a symposium on behalf of real estate enterprises, which was officially held. In addition to central enterprises such as China Merchants and poly, private enterprises such as country garden, Longhu and Midea real estate also received “tickets” for domestic bond issuance. In April 2022, under the guidance of the CSRC, the Shanghai and Shenzhen stock exchange held a “Symposium on credit protection tools to support private enterprise bond financing”. The CSRC pointed out that it actively supported all parties in the market to play the role of credit protection tools in supporting private enterprise financing, and encouraged market institutions and policy institutions to provide credit enhancement support for private enterprise bond financing by creating credit protection tools. In May 2022, Shenzhen stock exchange held a symposium on “improving credit support for private enterprises”, focusing on improving credit support and studying and discussing measures to alleviate the “financing difficulties” of private enterprises.
The “demonstration effect” of leading private enterprises issuing bonds will drive more private real estate enterprises to obtain market financing.
Longhu group plans to issue corporate bonds of no more than 500 million yuan, Midea real estate will issue corporate bonds of no more than 1 billion yuan, and country garden plans to issue corporate bonds of no more than 500 million yuan. The three private housing enterprises were selected as financing demonstration Housing enterprises by regulators, which means that the government’s financing measures to support private housing enterprises are accelerating the implementation. The financing environment of private real estate enterprises is gradually warming up, and then more private real estate enterprises may obtain financing in the open market.
Financial soundness and appropriate leverage are the key to obtain high credit rating. According to the rating data of S & P and Moody’s, Longhu, together with Greentown and country garden, was rated “investment grade”. In January 2022, Longhu group successfully issued 2.8 billion yuan of corporate bonds, and in March, country garden obtained China Merchants Bank Co.Ltd(600036) 15 billion yuan of M & a quota.
Investment advice
With the implementation of urban policies into the deep-water area, many places have introduced new policies on the demand side of the real estate market to stabilize market expectations. With the frequent occurrence of supply side policies such as pre-sale fund supervision, AMC admission rescue and credit risk mitigation tools, it can stabilize market confidence and promote the gradual recovery of the sales market.
With the gradual relaxation of local sales and local auction policies, the state-owned central enterprises with low leverage in the early stage will take the lead in earning profits, and the industry pattern is facing reconstruction. It is suggested to pay attention to the relevant targets: leading real estate enterprises with low financing cost and sustainable land acquisition in the first and second tier cities, such as Poly Developments And Holdings Group Co.Ltd(600048) ( Poly Developments And Holdings Group Co.Ltd(600048) . SH), Greentown China (3900. HK), Longhu group (0960. HK), Hangzhou Binjiang Real Estate Group Co.Ltd(002244) ( Hangzhou Binjiang Real Estate Group Co.Ltd(002244) . SZ), Huafa Industrial Co.Ltd.Zhuhai(600325) ( Huafa Industrial Co.Ltd.Zhuhai(600325) . SH), Cinda Real Estate Co.Ltd(600657) ( Cinda Real Estate Co.Ltd(600657) . SH), etc.
Risk tips
Real estate policy regulation exceeded expectations; The sales of commercial houses were lower than expected.
