There have been more than $6bn of Chinese property deals so far this year, and the pace of issuance has been picking up. Mainland developers raised $2.55bn from dollar bonds in October, more than the double the $1.22bn they sold in January, the previous biggest month. Investors now say that ever more companies are adding their names to the pipeline.
These companies are coming to the market ahead of the Chinese communist party’s 18th National Party Congress on Thursday. Thousands of party members will gather at the congress for around a week, plotting the next five year plan and picking a new generation of leaders — including the widely-expected choice of Xi Jinping as the new leader of the country.
The handover of power in China is being closely watched by amateur Sinologists across the capital markets. Bankers argue that state-owned companies are largely putting their plans on hold at the moment, waiting for the party meeting to end before putting in place new fund-raising.
But this watch-and-wait attitude has not spread to the private sector. Funding officials at privately-owned property companies are going like gangbusters, turning to the bond markets for a raft of dollar funding in the build-up to the leadership transition.
Confidence breeds success
The big rise in dollar bond issuance from this sector could be seen as a reaction to the pending change of leaders, an attempt to fund before uncertainty — over remittance, over housing policies — scuppers their ability to go offshore, as well as to the willingness of foreign investors to buy their bonds.
There is no doubt some truth in this, but the spree of funding should largely be seen as a positive sign for China. After all, the money these companies are raising needs to be put to work somewhere, and with the exception of those regular borrowers looking to refinance old debt, that means new developments on the mainland.
The willingness of so many companies to commit to new projects shows that those closest to the situation have confidence in the ability of China’s policymakers to cushion the economy from any knocks to come.
That is undoubtedly a good sign, but investors and bankers cannot breathe easy just yet. Historians looking back on this week will focus on the Chinese leadership transition and, of course, on the US election. But they should not forget that it was also a week in which a two-day general strike was called in Greece, in an attempt to undermine efforts to push an austerity bill through parliament. It is these facts on the ground, rather than changes at the top, that will really determine the fate of the global economy for the years to come.
But any good signs will be welcomed by market participants at the moment, and the Asian bond market has once again proved its ability to generate good news. Chinese property companies do not have a clairvoyant insight into the future of their local economy, but their confidence will help fuel economic activity, and makes China’s future look bright.