Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that international rating agency Moody’s has downgraded Chinese real estate giant Vanke’s credit rating to junk status. Moody’s warned of further downgrades in the future.
The downgrade reflects Moody’s expectation that Vanke’s credit metrics, financial flexibility and liquidity buffers will weaken over the next 12 to 18 months. The company’s contracted sales are declining amid a prolonged downturn in China’s housing market, and uncertainty over financing channels is increasing day by day.
The move by Moody’s may further weaken the world’s confidence in China’s real estate market. Vanke is usually recognized as the third largest real estate company in China, and it was one of the few developers in China with an investment-grade credit rating. Vanke is known to have strong government backing.
Currently, S&P Global Ratings and Fitch Ratings still maintain a non-junk rating for Vanke. Chinese regulators reportedly met with financial institutions to ask major banks to step up financing support for Vanke and called on bondholders to discuss debt repayment extensions with Vanke. However, not long ago, Vanke was rejected after seeking permission from insurance companies to defer debt repayments.
Source: Lianhe Zaobao, March 12, 2024
https://www.zaobao.com.sg/realtime/china/story20240312-3143019