china mainreal estateDevelopers’ accumulated foreign exchange loss was approximately US$3 billion, mainly due to the expansion of US dollar-denominated debt in the first half of the year as the RMB depreciated further against the US dollar, putting pressure on real estate developers to achieve gone up. Cash to pay off growing debt.
Before restrictions were imposed over the COVID-19 pandemic in 2020, 24 of the top 30 listed real estate developers in China had a combined net exchange loss of 21.25 billion yuan (about US$2.75 billion), according to Nikkei Asia research data.
Although these are paper exchange loss amounts, actual gains and losses still depend on the maturity date.exchange ratedepends on. Still, the data could serve as a gauge of currency risk for financially distressed developers, especially as the yuan fell to a 16-year low against the dollar on September 8.
Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, believes the renminbi’s depreciation is due to increased liquidity due to the People’s Bank of China reducing deposit reserve ratios and interest rates.
Asia said: “These two items, plus the money now flowing into China,investAny negative value in combination will cause a depreciation of the RMB. The yuan’s depreciation is a by-product of aid to real estate developers, but it has clearly increased the financial burden on real estate developers with excessive dollar-denominated debt. ,
The report said that Evergrande Group ranked first with a net foreign exchange loss of 4.14 billion yuan, accounting for 12.5% of the loss of 33 billion yuan in the first half of the year. Of Evergrande Group’s 625 billion yuan of debt as of the end of June, loans denominated in US dollars and Hong Kong dollars accounted for 26.3%. The Hong Kong dollar exchange rate is closely linked to the US dollar.
The RMB devalued by nearly 10% in the first half of this year, and Evergrande Group’s debt borrowed in these two foreign currencies increased significantly after being converted into RMB.
Country Garden’s net foreign exchange loss exceeded RMB 3 billion, leading to a record-breaking net loss of RMB 48.93 billion in the first half of the year. Country Garden has become the subject of close attention from global investors after it failed to pay a combined US$22.5 million interest on two US dollar-denominated bonds due last month.
The impact of US dollar exchange rate fluctuations on Bawali Development Group has gradually diminished, the report said. This real estate company, which ranks highest in contracted sales and is also a People’s Liberation Army-related entity, has just over 10 US. Dollar-denominated bonds and short-term loans. billion, down from $1.5 billion last year.
Longfore Real Estate Group is trying to use hedging to manage the risk of exchange rate fluctuations and gradually denominate loans in US dollars and Hong Kong dollars. Longfore Real Estate is one of the few private developers listed as investment grade by the world’s three major credit rating companies.
Longfore Group’s current foreign currency-combined debt stands at 21.6%, a decrease of 5.4 percentage points from three years ago. As of the end of June, 97% of it is hedged through interest rate swaps.
Despite the pessimistic outlook for the real estate industry, the People’s Bank of China is unlikely to take much risk from currency fluctuations.
Xu Wang, head of foreign exchange and interest rate strategy at BNP Paribas in Hong Kong, said: “I believe real estate developers’ dollar-denominated debt will not become an exchange rate consideration for the People’s Bank of China. While the exchange deficit is huge, the problems are limited. Many developers are in financial trouble. Many other developers have significantly reduced their positions or hedged their foreign exchange positions.