Central China Real Estate Ltd. and China SCE Property Holdings Ltd. are marketing U.S. dollar-denominated bonds, adding to the record $6.05 billion raised by Hong Kong and Chinese developers this year.
Central China Real Estate, part-owned by Southeast Asia’s biggest property developer CapitaLand Ltd., is offering seven-year securities to yield about 8.125 percent, while China SCE and China Aoyuan Property Group Ltd. are marketing more of their existing 2017 bonds, according to people familiar with the matters. Future Land Development Holdings Ltd., based in Shanghai, also plans to sell securities in the U.S. currency, according to a company statement to the Hong Kong stock exchange today.
Developers from China and Hong Kong have sold almost half of all U.S. dollar notes in Asia outside of Japan this year, with January already the busiest month for such offerings in data compiled by Bloomberg since 1999. New home prices in China rose for a seventh-straight month in December and expectations for further advances boosted sales, SouFun Holdings Ltd., the country’s biggest real estate website owner, said Jan. 4.
“Investors have fresh cash in the new year and are hungry to take positions, which is giving Chinese property companies the opportunity to increase their liquidity,” said Frank Huang, head of fixed-income trading at SinoPac Securities (Asia) Ltd. in Hong Kong. “The cost of funding in dollars is still low.”
The average yield premium Chinese real estate companies pay has plunged 249 basis points in the past 12 months to 223 basis points over benchmark rates as of Jan. 18, Bank of America Merrill Lynch indexes show. That compares to a 106 basis-point fall to 158 basis points for developers globally.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose by 0.5 of a basis point to 107 basis points as of 3:36 p.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The gauge has ranged from 102.8 basis points to 110.1 basis points this year, according to data provider CMA.
The Markit iTraxx Japan index declined one basis point to 137 as of 4:25 p.m. in Tokyo, according to Deutsche Bank AG prices. The measure is set for its lowest close since August 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Australia was also little changed at 114.5 as of 10:39 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The benchmark has ranged from 111.6 to 127.5 this year, CMA prices show.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.