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September 28, 2016

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Bourses consider restricting bond issuance by property developers

CHINA is considering tightening measures on bond issuance by property developers, the latest effort to cool the country’s overheating housing market and limit the inflating of a real estate bubble.

Shanghai Stock Exchange is working on tighter rules that would only allow developers rated AA or higher to sell exchange-traded notes, Bloomberg News reported yesterday, citing an anonymous source.

Qualified issuers would also have to meet at least one of the following criteria: listing in either onshore or offshore markets; owned by a provincial government, municipality, the central government, and some major city; or be among the top-100 property companies ranked by the China Real Estate Association, the report said.

A source at the bourse reached by Shanghai Daily yesterday refused to neither confirm nor deny the report, only saying that the adjustment of bond issuance regulation depends on China Securities Regulatory Commission, the securities regulator.

A report by the 21st Century Business Herald also said Shenzhen Stock Exchange is planning similar measures.

It said bourses would also classify qualified property companies into three risk categories based on indicators including total asset, operating revenue, net profit, debt ratio and the level of inventory. Higher threshold will be imposed on companies with higher risk.

The move, if implemented, would be the latest effort by the government to tame a housing frenzy fueled by low interest rates and a lack of investment choice amid economic slowdown.

As of September 19, China’s listed property developers had issued 960 billion yuan (US$144 billion) of bonds, more than three times the amount in the same period of last year, data from Wind Information Co showed.

Official data showed China’s home prices rose at a faster pace in August. Second and third-tier cities such as Xiamen and Hefei witnessed more than 40 percent year-on-year increase in home prices last month.

To combat the ever-increasing home prices, city governments across the country, including Hangzhou, Hefei, Suzhou, Nanjing, Xiamen and Wuhan, have introduced tightening measures, by either limiting the number of homes people are eligible to buy or making the down payment higher.


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