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8 leading Chinese real-estate firms face mounting risk: Wanda, R&F, Evergrande, Aoyuan, China Overseas Grand Ocean Group, China South City Holdings, CIFI, Fantasia

8 Chinese real-estate firms face mounting risk: report

Liang Shih-huang and Staff Reporter

2014-06-22

US financial services company Standard & Poor’s recently listed eight leading real-estate firms in China and Hong Kong that are facing liquidity risks and a breach of contract violation because of capital pressure exerted by declining sales.

The firm stated that eight leading real-state companies in China, namely, China Aoyuan Property Group, China Overseas Grand Ocean Group, China South City Holdings, CIFI Holdings, Wanda Commercial Properties, Fantasia Holdings, R&F Properties and Evergrande Real Estate Group, had reported debt growth of over 50% in 2013.

Evergrande Real Estate Group doubled its debt in 2013 from a year previously.

Standard and Poor’s also voiced its concerns for smaller property developers saying their re-lending risks were worsening and they might even face severe liquidity risks and fail to pay off their bonds if their sales performance did not improve.

According to data from the National Bureau of Statistics, housing prices in 70 large and medium-sized Chinese cities slipped and the downturn has extended to first-tier cities, such as Beijing and Shanghai.

An analyst from the firm stated that lending costs among Chinese real estate developers has increased substantially in 2014 and the lending channels of banks and issues of bonds has tightened, due to which funding pressures have widened.

Since the central government has become more cautious in releasing liquidity, these Chinese firms are not expected to gain cash flow stemming from government policies in the near future.

Some Chinese real-estate firms are facing worsening financial difficulty, however, because they expanded their lending to acquire land despite the pessimistic prospects of the housing market.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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