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中信证券:地产风险的至暗时刻已过 当前存在显著价差的地产债已显露参与价值

CITIC Securities: The darkest hour of real estate risk has passed, and now real estate bonds with significant price differences have shown participation value

Zhitong Finance ·  11/09/2023 08:39

According to a research report released by CITIC Securities, the darkest hour of real estate risk has passed. Although it will still take time from “qualification repair” to “industry recovery,” for vulture investors, real estate bonds with significant price differences have shown their participation value.

The Zhitong Finance app learned that CITIC Securities published a research report stating that credit risk in the real estate bond market has been repeated since 2023, while public opinion on mixed housing enterprises further disrupted the market in October. The implementation of Vanke's shareholder support this week gave the market a “reassurance pill.”Looking forward to the future, for uninsured housing enterprises, the fundamentals of the industry are gradually improving, and credit risk is gradually being cleared; for housing enterprises surrounded by public opinion, their “urgent needs” need to rely even more on shareholder support, especially the support of local government shareholders.Whether undertaking relatively low-quality projects to improve corporate cash flow or market-based bond purchases to enhance market confidence, it is possible to effectively improve the credit qualifications of housing enterprises, thereby mitigating debt risks. All in all,The darkest hour of real estate risk is over. Although it will still take time from “qualification restoration” to “industry recovery,” for vulture investors, real estate bonds, which currently have significant price differences, have shown participation value.

The main views of CITIC Securities are as follows:

Fundamentals are not a prerequisite for restoring confidence.

Since 2023, whether it is the net financing scale of real estate bonds or the valuation pricing of the primary and secondary markets, the market environment needs to be improved. In terms of net financing, in January-November (up to November 7), the net financing scale of real estate bonds was -38.059 billion yuan, which turned negative compared to the same period in 2022, mainly because the real estate bond issuing side has maintained a weak trend since 2023, and the scale of new issuance has decreased by 10.86% year-on-year. In terms of issuance interest rates, in the third quarter, rising market concerns about the solvency of mixed systems and private housing enterprises caused an increase in issuance interest rates. With the support of sales policies introduced in many places, the market's confidence in the qualifications of state-owned enterprises increased, so attribute price spreads widened. In terms of credit spreads, sales support policies have been introduced in many places since September. Highly qualified housing enterprises may be the first to benefit. Interest spreads on AA+ and above real estate bonds have narrowed, and AA grade has maintained an upward trend due to public opinion.

Real estate bonds interpret “the leftovers are king”.

Although public opinion on real estate bonds has fluctuated between private enterprises and mixed housing enterprises since August 2023, the scale and number of defaults have declined marginally. Defaulted real estate bonds were dominated by housing companies that had previously taken risks. The size of the first defaulted real estate debt was 9.332 billion yuan, accounting for 4.61%. Compared with the risk exposure periods in 2021 and 2022, the new defaulters and the scale of actual defaults have been effectively reduced. Combined with the November-December real estate refinancing policy, it is expected that the November-December property refinancing policy will reinvigorate the credit environment of housing enterprises, and the fundamentals of the industry will continue to be restored under policy care. The bank believes that the real credit risk of real estate bonds is gradually being cleared. Although public opinion may still be disturbed in the short term, the real estate bond market has entered the “leftovers are king” stage.

In fact, housing enterprise bonds require even more support from shareholders with a government background.

Although the sales area and growth rate of commercial housing have benefited from the continuous increase in sales support policies in many regions, the sales area and growth rate are still below the 2021 level. After the traditional “gold nine silver ten” has passed, the effectiveness of sales support policies and the sustainability of the industry's fundamentals recovery momentum remain to be seen. For housing enterprises where short-term debt pressure is high, in a context where operations are difficult to repair quickly, debt conversion requires even more external support, while external credit enhancement measures also require housing enterprises themselves to provide counterguarantees. For housing enterprises with weak qualifications, their own lack of high-quality asset projects or weakens credit qualifications, refinancing channels are blocked, and external credit enhancement plays more of a role in adding the icing on the cake rather than providing support. In this context, for housing enterprises with high debt pressure, especially those bound by public opinion, their “urgent needs” need to rely more on shareholder support, especially the support of local government shareholders. Whether it is undertaking relatively low-quality projects to improve corporate cash flow or market-based purchases of bonds to enhance market confidence, it is possible to effectively improve the credit quality of housing enterprises by removing the cocoon and effectively improving the credit qualifications of housing enterprises, thus achieving debt risk mitigation.

How to choose real estate bonds under improved expectations.

Since 2023, interest spreads on domestic real estate bonds have been stratified, and long-term US dollar bonds are relatively cost-effective. In a context where risks are gradually cleared and defaults are more difficult to transfer to state-owned housing enterprises, for allocation markets, whether domestic bonds or US dollar bonds, after the September-October adjustments, their respective yields have reached a relatively high level, and the cost performance ratio has already been highlighted. As for the trading market, Vanke shareholders' support for mixed housing enterprises can boost confidence in the real estate bond market, and valuations adjusted rapidly in the early period are also expected to be repaired. At the same time, uninsured private real estate bonds with a remaining term of less than 1Y are also expected to participate after market sentiment is fixed.

Risk Factors:

Financing supervision policies have been tightened beyond expectations; residents' expected income growth has fallen short of expectations; housing price fluctuations have exceeded expectations; individual credit risk has impacted the market, etc.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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