Roundtable: Chinese high yield bond market fights off Covid volatility
GlobalCapital and Standard Chartered hosted a combination of virtual and in-person roundtable on the China high yield debt market at the end of November. The third part of a 2020 series followed the first roundtable in April and the second in July. This time around, leading experts came together to discuss the opportunities and outlook for the Mainland’s high yield bond market.
While China was the first country to be hit with the outbreak of Covid-19, it was also the first to come out of the pandemic-induced dent in growth. As China’s economy bounced back, its companies re-entered the bond market, which was shut in March and April, to continue selling hugely successful dollar deals.
In many ways, the market seemed to live up to the expectations that the roundtable participants had outlined to GlobalCapital in April. China's high yield real estate borrowers were resilient and many raised benchmark deals at new low yields. But other parts of the high yield sector were not as lucky. Cracks in the market showed as defaults appeared, and Chinese regulators swiftly introduced new policies to keep the market in check.
Despite the apparent success of China's high yield sector overall, uncertainties remain. Will borrowers be able to access the offshore market without trouble in 2021? How will new Chinese regulations affect corporations? Are some borrowers yet to see the true effects of Covid-19 on their businesses? GlobalCapital sat down with a panel of senior market participants at the end of November to find out.
The participants were:
Kenny Chan, chief financial officer, Zhenro Properties Group
Adrian Cheng, senior director, Asia Pacific corporates, Fitch Ratings
Simon Cooke, portfolio manager, emerging markets, Insight Investment
Eugene Fung, senior portfolio manager, head of credit and equities, BFAM Partners
Lawrence Leung, head of capital markets and investor relations, Cifi Holdings (Group) Co
Gerhard Radtke, partner, Davis Polk & Wardwell
Fredric Teng, head of high yield, capital markets, Greater China and North Asia, Standard Chartered
Moderator: Morgan Davis, bond editor, GlobalCapital Asia
GlobalCapital: A lot has changed since our first roundtable in April. What have been the most noticeable market developments for China high yield this year? Did the sector live up to your expectations of resilience?
Fredric Teng, Standard Chartered: At the onset of Covid in April, I felt the sector had the ability to be resilient. The question was whether the market was going to be able to accept that messaging. The issuers were able to respond to the needs of the market and to show transparency with their communication. It's good to see that we have been able to essentially validate our April message. Adrian Cheng, Fitch Ratings: When we first had this conversation back in April, there was a sense that overall real estate sales in the market were going to decline quite severely for 2020. Back then, we actually said that, assuming the pandemic gets resolved within a few months, there's still plenty of time for homebuilders to catch up on sales for the rest of the year, which seems to be the case now. If we look at the October sales numbers, they've been robust. And according to the National Bureau of Statistics, the monthly sales for developers actually increased by 25%, compared to October last year, which is pretty significant. If you look at the cumulative sales, this year compared to last year, we went up 8%. We've pretty much put Covid behind us. We can almost look at 2020 just like any other year in terms of sales. We're probably talking about 5% to 10% sales growth for the whole of 2020.
Simon Cooke, Insight Investment: In April, we were looking at very strong double digit returns over the next 12 months, and a pickup in defaults particularly among the weaker industrial names. What's happened? We've seen the returns, but they happened in less than six months rather than 12 months. It was a much faster recovery than expected, both in the real economy and in markets. When we were chatting in April, the first quarter pre-sales for China property were down 14% year-on-year. Now 11-month 2020 pre-sales are up over 10% year-on-year, and companies are generally on track to hit full year targets. I don't think anyone would have dared to predict that back in April.
The pickup in industrial defaults has also happened, but has been softened to an extent by government support and the speed of the economic recovery.
Eugene Fung, BFAM Partners: We've seen a lot of issuers that rely on offshore bonds to finance themselves no longer have access to the market. We expect more defaults to happen. But if you look at, for example, Zhenro and Cifi, they just continue to tighten. Investors feel like they want to invest in companies so that they can sleep at night and not wake up the next morning and get some kind of nasty surprise.
GlobalCapital: One of the new policies for China real estate recently is the so-called "three red lines”. These are metrics around debt that developers will have to meet before they sell additional bonds. What does this policy mean for the sector?
Cheng, Fitch Ratings: Funding remains very tight and it actually got even tighter this year as a result of the introduction of this three red line policy. Our take is that the leverage ratios of property developers should at least be stable going forward. But there seems to be lack of clarity on a few things. First, the exact formula of how to calculate these three ratios is not very clear. There are some very obvious names which have crossed the red lines. But then, for those borderline names, it's not very clear whether they actually push the red lines unless we get an example. That's one thing we are a little bit concerned about.
Secondly, when it will be implemented is not very clear. The market seems to say it will be enforced in 2021. But there are also other voices saying that one red line will be introduced in June next year. One more will come in June 2022. And then the final one is coming in June 2023.
The third thing, which I think is the most important, is to what degree the regulators are looking at homebuilders' joint venture (JV) projects when we're looking at leverage. As we all know, developers do a lot of JV projects. A lot of these projects may not be consolidated into the issuers’ balance sheets. To what extent could a developer transfer a JV project out of the balance sheet to avoid the three red lines? We're not very clear. Even from our conversations with the various developers, there are different stories coming out.
Lawrence Leung, Cifi Holdings: To us it is not a brand-new thing, because most of our funding channels are subject to some kind of quota system. It has always been the intention of the government that the leverage of developers be kept under control. In the past, a lot of developers were chasing for size instead of profitability. A lot of these small developers get the land and boost the size, but after the three red lines are in place, that is not going to happen. Gerhard Radtke, Davis Polk & Wardwell: The three red lines don't really feature in the deal documentation yet. Once these are formalized it will be interesting to see how the market will approach these. In some sense, it's a new financial metric that is going to be somewhat different from the metrics in the financial statement and also different from the metrics that the rating agencies are looking at, so it will be difficult to crystallize those numbers. So far, nobody has really been willing to quantify their position in this respect, but some issuers have made the first baby steps to try to tackle that issue.
Kenny Chan, Zhenro Properties: To be honest, I think these key details will be very hard to present in the OC. Because if you look at the existing use of proceeds, they are strictly for refinancing. The government has not yet explicitly explained the red line formula. We understand some companies have received the checklist, but not everyone. When they have to enforce these new requirements, the government first needs to explain clearly how to define it.
GlobalCapital: Has Covid changed how Chinese regulators look at high yield issuance, in particular bonds from real estate companies?
Chan, Zhenro Properties: Four years ago, the regulations were not very clear. Even though you had a quota, you didn't know when you had to use it. Some developers got penalised when they couldn't utilise the quota, and some developers did not even apply for quotas. This year, I think they aren't just looking at the next 12 months in finance activities. The NDRC [National Development and Reform Commission] is now more willing to look into the details. They're more willing to listen to developers, and they trust the developers. At the same time, if you can't prove that your bonds are going to refinancing activities, you will be in trouble.
Leung, Cifi Holdings: For developers, Covid is actually not affecting the on-the-ground business a lot. For most developers, liquidity is still adequate. I believe most of the developers have already achieved more than 80% of their annual targets. Developers are in trouble when they have a lot of short dated debt they have to refinance. And when they have to refinance, they face some hurdles, including sentiment in the capital markets. I don't think the NDRC has a lot of bearing on the liquidity situation. It really depends on the strategy of the developers — whether they can actually maintain healthy liquidity. The NDRC quota, I tend to agree with Kenny, is about being more transparent. The challenges are not coming from the NDRC.
GlobalCapital: All Chinese high yield issuers are not created equal, so which companies are struggling to get offshore funding this year?
Fung, BFAM Partners: I think most people are surprised by how resilient the on-the-ground contracted sales are for China property. Investors kind of hide in the sector because it is almost like a safe haven. It had a similar effect last year when the trade war was brewing. One of the biggest differences this year is that people are not able to go and do site visits. The image offshore of whether a company has its capital markets strategy in order is a big difference. There are companies which consistently traded wide just because of how chaotic or messy their capital markets operations are. We try to look beyond that. We like certain companies that stay wide because we feel like they are misunderstood. But it is dangerous because no high yield company can just say, ‘we're going to use our organic cash to repay all of the maturities coming up’.
Cooke, Insight Investment: The idiosyncratic issues within certain industrials have been exacerbated by the pandemic. Think about the spate of onshore defaults recently from state-owned enterprises (SOEs). They are issuers that a lot of people in the market were avoiding before the pandemic because of underlying issues. They're for-profit enterprises from lower-tier regional or local governments and have counted on government support to pay down debt. There's a theme between all of them: not all local governments have the ability or willingness to support every SOE. That was known before. These kinds of things have been accelerated by the pandemic. The most common red flags in industrial names are those with weak business models and thin operating margins. The other is governance. We have seen this year a number of issuers where we have had ESG [environmental, social and governance] red flags for a while and they have come to fruition.
GlobalCapital: We recently saw the announcement from US president Donald Trump that US investors will be restricted from investing in Chinese companies with military links. These don't seem to be the high yield companies we are talking about today, but does the executive order have an impact on China high yield?
Radtke, Davis Polk & Wardwell: If one really looks at the details, there are a couple of high yield issuers which have shareholders on the list. And if one looks at the executive order, it is unclear how it applies to a group of entities. In plain language, it seems to refer to only the entities that are named. But if one looks at the US regulatory posture in the sanctions space, historically, they applied a group approach. Nevertheless, there are also examples from the US in the same space where affiliates or subsidiaries that have a certain independence, whether by virtue of being separately listed or being in a different line of business, may get relief. The names I was referring to are certainly very different from their parents on the list. They should have a pretty good shot of getting out of it, but right now there's just uncertainty. Uncertainty in respect to the investors who will be willing to continue to play in that space as well. We all know that a lot of the Reg S money is in some sense affiliated with US entities. If the investor is a non-US person for purposes of the executive order, that may not yet mean that that investor is necessarily comfortable. Some names may have to take a rather conservative approach for the time being.
Teng, Standard Chartered: I think it's important when looking at this issue to understand that from a high yield standpoint, we're talking about either SOEs or implicit SOE status. And this is where it can be quite disruptive from a market movement perspective. For example, one or two of these entities, on a standalone basis, probably have a mid to high single B credit profile. But because of the perceived support, they may be getting a BB or investment grade rating.
There's a major difference in terms of how private entity bonds versus SOE bonds are marketed and how they're distributed. In the case of some of these SOE or implicit SOE categories, the way the bonds are marketed tends to be quite narrow, with more emphasis on their ratings than their underlying standalone credit. They're marketed to domestic Chinese banks and financial institutions that probably give more weight to this implicit support. Once that support is gone, the next level of investor support is a lot lower in price. This combination provides the cocktail you're seeing to create volatility.
GlobalCapital: What about a week, like in November, when we were caught off guard by a default that triggered concerns about SOE related names. Is that something that will drag on the market? Are there other factors at play that cut off primary issuance and impacted bonds in secondary?
Teng, Standard Chartered: Generally, people have been comforted by the fact that these defaults are quite name specific. The media wrote a lot about the onshore defaults but in reality, these credits, these coal names, they never would have made it into our suites, from a credit quality standpoint. Nor could I have foreseen how they could have successfully had a prolonged existence in the offshore capital markets. By the nature of these credits, the exposure would be very regionalised, even within China. There's also the nature of the onshore bond market, because it isn't really like the offshore market in that it is freely traded and widely distributed. Onshore is a quasi-loan market.
Fung, BFAM Partners: I slightly disagree with what Fred said about the quality of issuers. I think that's giving investors offshore way too much credit. We touched upon the OC [offering circular] and what goes into it before, but in reality, the percentage of investors who actually read the OC before they make the investment is probably less than 10%. They probably only want to read the OC when it is in distress. For example, even though we've never bought their bonds, I just realised that China Fortune Land can actually change any material bond terms with 66% approval. That's probably something that people were not aware of when buying the bonds.
I would point to the fact when there's a dearth of yield, the offshore guys will reach. Look at all the defaults in the offshore bond market in the industrial space. All of them were done in 2017. That vintage was one of the best performing years for bonds in general, and that vintage is particularly poor just because people were reaching and buying anything with a yield and a half decent rating. Those issuers actually should have never been brought to the market. All of us kind of fell for it. I would say that's certainly something that that we've learned our lesson from.
When we talk about regulation changes, one thing that's really understated is why these issuers came offshore. A few years ago, when the government put the clamps on the banking sector and made loan officers liable, it changed the dynamics of onshore loans in a big way. No longer should people assume that banks will roll their loans, let alone increase the line given. Eventually for companies that are not disciplined, some of them are okay replacing those loans with onshore bonds and maybe offshore bonds. But demand can be very fickle. And this is what leads to more defaults.
GlobalCapital: Kenny, from an issuer's experience, how savvy are investors in this regard? What do they ask you about?
Chan, Zhenro Properties: I have to agree that in the past four years, no one asked about the OC when we launched a deal. When I hosted investor calls, people just asked about the markets and the fundamentals of the company, but they never asked about the terms. If something happened, they would look at the OC, but it would be too late. At the same time, if they have to go through every OC, they won't have time to make an investment decision. That's why they rely on us to deliver what we have promised.
Fung, BFAM Partners: For onshore M&A related bonds, the biggest problem is the mentality of the issuer. I bet you all of them never intend to ever repay by either selling their assets or eventually integrating that business into their whole business and generating much better cash flow and the ability to organically repay. They always just expect they can borrow money. That is what probably gets that type of borrowing into trouble eventually. Sometimes it is not a great business and what we've seen a lot of times is that they buy at the top of the market. And there is not a next buyer. When we look through the mistakes we've made in the last five years, there are some things we definitely realise — what is the intention of the company, and how well do they plan for these acquisitions. In some sense it's up to investors to be savvier and more discerning. That said, one of the biggest problems we face is not necessarily just in bonds, but investing is getting more and more passive. Most of the investor base out there are not necessarily driven by total return. That is something that is super dangerous because all you're doing is just following the herd in the broader market. You don't have the ability to actually be discerning if you want to.
And that's something that is going to create opportunities. We just have to stay very disciplined and very opportunistic. We hardly ever short China property companies because our core thesis is that we think this is one of the juiciest sectors, from a return versus default perspective. Over the last three years, we've consistently had a small short on a couple of developers that traded lower in November, because we think their ownership structure, and the way they do capital markets transactions, lend itself to long term problems. While I'm well off being long on healthy companies like Cifi and Zhenro, I used that to partially finance my short. I think as long as people open their eyes and do the work, all the evidence is actually out there.
Chan, Zhenro Properties: Recently, investors mainly focus on the three red lines, the potential impact of Covid and whether we can deliver our products to end users on time. I have a feeling that investors are trying to stay away from smaller players, especially when the government has been emphasising the need for market consolidation. You could see Zhenro as a single B credit with a 7% handle, versus other developers that price at 13% or 14%. The BB universe is very stable. Investors don't just go for returns. They want to be safe.
Leung, Cifi Holdings: The benefits of investing in China property bonds is that most of the frequent issuers provide a lot of transparency to investors. When these companies go out to market, normally these investors have the basic information already. There's not a lot of additional work when they go to make the decision of whether to buy or not. It's almost all pricing and investor appetite for that particular time. The trend is that for quality bonds, the yield is going down. Issuers like ourselves have to explore a wider investor base because some of the private bank clients, or institutions in Asia, may find the yields less attractive. We have been doing more virtual roadshows and we also host separate meetings with ESG specialists because a lot of the major global funds are putting more emphasis on ESG-related matters. In order to invest in substantial size they need to make sure the issuer maintains certain levels of ESG standards. This year we have been spending a lot more time providing more transparency on different ESG aspects. I think this is the trend going forward for most of the more established issuers.
As we become a more prominent developer in China, we need to attain higher social responsibilities. In the higher tier cities in China, the local regulations already require higher standards in terms of green buildings and health and safety issues for construction workers. And obviously our stakeholders have expectations that we will improve in all these aspects. The green bond is a good start, although if you look into the yield curve it is not giving us a lot of cost benefit. But it helps us to broaden our investor base, and at the same time it helps us to uphold higher governance standards. In the end, it's a benefit to our stakeholders. Having higher ESG standards is also a very good risk management tool.
GlobalCapital: Are you finding ESG factors to be increasingly important for investors this year?
Chan, Zhenro Properties: The so-called ESG report is not a new topic. For listed companies, there are public ESG reports every year. But because our coupon is getting lower and lower, we have to find more investors to enlarge our investor space. For the past few years, there have been ESG-related funds, especially in Europe, so it is time to explore this sector.
In terms of pricing, we did two green bonds successfully. We had an over 35% allocation to Europe for our first green bond. We don't treat this as just a marketing strategy. We really want to show that we have exemplary ESG procedures, and we really want to enlarge our investor base. After that green bond, we have received so much positive feedback from investors. But we are facing a dilemma. If one day we do a regular dollar bond, does it mean we are going to get rid of the green elements? Or do we have to keep doing green bonds?
GlobalCapital: From an investor standpoint, are green bonds or ESG reports that important for high yield Chinese credits?
Fung, BFAM Partners: For China property, it's a luxury to say "hey, we do some green bonds, we do some normal bonds, as a matter of pricing or expanding our investor base”. For some sectors, it's a matter of life or death. ESG is becoming increasingly more prominent, even for us for the first time. We are formulating internal ESG policies. We've never done that before. Right now, ESG is very, very, very much dominated by the E. Hopefully we will see it shift more to the S and G. But you're definitely seeing, for example, thermal coal companies knowing that they have better acquired additional businesses away from just thermal coal, because they know that if that's their only business in five years, if not shorter, they'll probably not be financeable. That's just where it's going. We are coming up with an ESG policy as that has become a requirement for a lot of our large investors.
Cooke, Insight Investment: We consider ESG risk for every investment we make. Obviously how ESG risks are managed vary from sector to sector or region to region. We identify the material ESG risks, analyse how they are managed in practice, and what the direction of travel is. Where we feel that an issuer is not addressing the risks, nor are they seeking to address them going forward, we won’t invest. Why? Because we’ve repeatedly seen that correlation between unaddressed material ESG risk, and heightened default risk for high yield issuers. Teng, Standard Chartered: The investors in this space are tremendously sophisticated. It's not because you slip the green label on, that suddenly they come out of the woodwork and start buying these bonds on offer. I've had to explain this over and over again to issuers to ensure that they understand what we're talking about here. Both Cifi and Zhenro have a culture of ESG within the company already.
Around yields, it was a year when we also saw upgrades in the sector. The most important one was Country Garden, which has escaped the high yield rating pocket into high grade. Yields are going low. What we have seen on the two green bond transactions for both Cifi and Zhenro is that first the investor needs to be willing to buy the credit. Then you may open up a bigger bucket of liquidity with ESG. They have both benefitted from this general rally by attracting a larger pool of ESG liquidity.
Radtke, Davis Polk & Wardwell: The dominating perspective seems to be this realistic approach, in particular for the onshore business, where there's just this groundswell of upgrading one's position with respect to the future-oriented environmental and social footprint. There's also the price and distribution angle, and in that context, I've heard it distinguished between marketing in Europe and marketing in the US. In Europe, people said it is more about broadening of wallets abroad and the investor footprint, whereas in the US, it seems to be a little bit more pricing oriented. Maybe that tips the balance of accessing the US market in the context of a green bond issuance.
GlobalCapital: Outside of ESG, another trend this year is an increase in tender announcements coming out simultaneously with new primary market deals. Do liability management exercises help issuers sell bonds in volatile markets?
Teng, Standard Chartered: It goes back to regulations. You have these NDRC quotas and they have expiry dates. These quotas are meant for refinancing. But then you also have to time deals with the market windows available. How do you do all this without double borrowing? Issuers want to make sure there's no negative carry. This year has shown us that markets are still extremely volatile. We basically had eight months of execution after a quarter where the market was kind of shut. These issuers know very well that it may continue, which is why they may have chosen the window to sell bonds, and liability management exercises are used to reduce negative carry.
Chan, Zhenro Properties: You also have to look into the company's credit. Not every company could do this kind of liability management. For Zhenro, two years ago, our first bond paid 13.875%. The bond we sold in mid-November paid 5.95%, so it definitely makes sense to do early redemption. The NDRC quota also kind of helped us because the supply of dollar bonds dropped significantly, if we compare it with two years ago. At the same time the market has strong liquidity. That's why it makes sense for us to do this kind of liability management. Leung, Cifi Holdings: There are very steep refinancing requirements in the first half of 2021. That means refinancing deals will be very active. We have to plan for refinancing ahead of time, so it's perfect timing. As our credits continue to improve, we are now able to issue longer tenor bonds at lower rates. No one knows if everyone will have to cram within a two to three month window to issue. I won't say we can’t refinance. It's just that the costs we can achieve, and the tenor we can issue, may be different from what we can achieve right now.
GlobalCapital: It seems we had a strong market window right after the US election was called for Joe Biden. Is that because Biden is expected to be better for China? Do you still have any fears about how US-China policy spats could affect the market?
Fung, BFAM Partners: I think it's very popular, especially in the US right now, to be anti-China. That said, Biden has a much longer track record of using diplomacy to achieve things, versus the Trump way. While Trump himself is not necessarily a war hawk, there are certain people in this administration who really wouldn't mind getting into full blown war. It was a peculiar choice by Trump to appoint a hawk to be secretary of state, when the role is supposed to be a top diplomat. Biden will definitely have more dialogue and a different way of dealing with things.
But Trump is still there. We already see the executive order banning US investment in the 31 Chinese companies, and everybody is scrambling to say "hey, what does that really mean?". Can we see more erratic and crazy behaviour as we get closer to the actual inauguration? For sure. One thing that this presidency has always proven is that all the rules are really out of the window.
GlobalCapital: Many people speak about the end of 2020 as an end to our Covid woes, but how accurate is that? Are you all optimistic about what the next year will bring us?
Radtke, Davis Polk & Wardwell: I am still hopeful that 2021 will bring a resurgence of new debut deals and that industrial high yield names will come out. We are working on a couple of projects that we hope to see go live in the first quarter. In the long term I do think the Chinese high yield space will broaden beyond real estate names. It is a question of time. It's driven by the onshore regulatory environment and the competitiveness against onshore funding. But there are so many who potentially could benefit from offshore funding that I do look forward to that – there are promising signs of life in the pipeline.
Cooke, Insight Investment: I think the hunt for yield will definitely continue next year, as an unintended consequence of central bank actions. Global growth is slowing. There are these unaddressed structural issues in the global growth dynamic. It's something which doesn't keep us up at night, but it's something we'll need to factor in post pandemic. When markets and investors are looking for normality, not too many remember that normality wasn't incredible. Global growth was slowing, and there were unaddressed structural issues.
On the flipside, we would expect some positives from the continued government policies and regulations, whether that's China or more broadly. We expect to see companies continue to pay attention to their balance sheets and liquidity, much like in response to the global financial crisis when we saw issuers become more conservative in their financial profiles. We expect to see something similar for issuers, ensuring they have more resilience in cases of flare ups, which is positive from a creditor standpoint. And some of those Covid sensitive companies might see further upside in 2021.
Fung, BFAM Partners: I'm probably less optimistic about 2021. I do think we're going to see the same themes continue. One thing I would caution about is that we've basically had central bank support all over the world for the better part of the last nine months, and in places like Europe for the last few years. Even in the US, they've cut rates. Policies have been very accommodating, and that's generally pretty constructive for bonds, and in particular high yield. One thing I don't think anybody is necessarily thinking about is that as the western world recovers from Covid, maybe towards the second half of next year, we could see the removal of some of these accommodations. I don't think investors, or a lot of issuers, are necessarily thinking about that.
If we turn back the clock even just two years to 2018, it already gave us a very good example of what a rising rate environment can do to the high yield market. And I think that we will continue to see more regulation onshore from China. I think they are very focused on making sure there are no bubbles and there is not over speculation in any of their markets. We could continue to see them tighten the screws. But I always remind myself that this also creates opportunity. The important thing for us is not to have FOMO [the fear of missing out], and to only pursue stuff that has extraordinary value. There is a lot of easy money going around. It's more pronounced certainly in the equity markets right now than the bond market, but the bond market will definitely directly have an impact as we see policy accommodations being removed.
Chan, Zhenro Properties: I'm always more positive. But, to be honest, next year China real estate will have concerns about policy risk. This year we have three red lines. What will happen next year is uncertain. When the vaccines are available, I think the market will rally because lockdown is over. I expect the market will become better next year. I have concerns about market policies, but for the overall market, I'm very positive for next year. Cheng, Fitch Ratings: According to Fitch, there's still an increase of debt maturities in the offshore market in 2021 compared to 2020 for Chinese corporates in general. And I believe it's about a 10% to 20% increase. In 2021, as long as the offshore market remains healthy, developers will continue to access the offshore market to refinance. When you look onshore, funding conditions are getting tighter for them.
Overall, it is going to be stable. Developers are going to be a lot more rational in expansion. Consolidation of developers which have more financial flexibility will continue. On the other hand, you're not going to see huge consolidation because, even for the developers with better financial flexibility, the overall regulations are going to make them more cautious as well. The other thing to look out for is whether there may be an increase in JV projects from private developers. That's something investors have to be mindful of especially when you look at the balance sheet.