Investors are favoring the stocks and bonds of state-backed developers in China's property sector, as they are more likely to benefit from government support. Some private developers, like Country Garden and CIFI Holdings, have bonds rated below investment grade.
The bonds of some private developers such as Country Garden and CIFI Holdings"Developers that are either state-owned, or investment-grade rated, or those that are owned by or associated with local financial institutions will be the ones that are able to borrow long-term, cheap financing," said Jenny Zeng, chief investment officer for Asia fixed income at Allianz Global Investors.
Meanwhile investors have taken a dim view of the private sector. Short interest in Asian real estate - mostly private Chinese property firms - has been rising since April, with shares loaned as a proportion of market capitalisation hitting 0.75% in July, showed data from S&P Global Market Intelligence.
Lower debt and better financing have helped state-owned enterprises gain market share. They have historically generated around one-third of property sales but that share has risen in recent years to about 59%, Capital Economics estimates. The top five developers by sales in the first half year were state-backed, showed data from China Real Estate Information Corp. Long-time leader Country Garden was sixth.
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