Dim Sum Express

Property: Dec sector liquidity review

    Listed developers experienced continued improvements in their financing environment in 2015 thanks to domestic monetary policy easing, with particularly high financing activity seen in 2H15 due to the continued recovery in the domestic property market. It is worth noting that company bonds became the most popular financing tool among listed property firms on the relaxation of issuance regulations. On the other hand, overseas bond issuance contracted during the year due to tougher approval requirements, the US interest rate hike and recent exchange rate turbulence. The costs of development loans, trust loans and company bond issuance all followed a downward trajectory in 2015.

    Construction: Rmb depreciation to enhance companies’ overseas business strength

    As most of the contracts signed between construction firms and project owners are settled in US dollars, recent Rmb depreciation will make the project prices offered by Chinese construction firms more attractive. In addition, the long period of time between order placement and project delivery and the fact that project revenue is settled using the spot exchange rate mean that these companies’ overseas revenue will increase as a result of Rmb devaluation. On the cost side, large construction firms tend to manufacture their own engineering equipment and use domestic labor for overseas projects. Overall, a cheaper Rmb will enhance the gross margin of construction firms’ overseas business.