Chinese property companies may risk a cut in their credit ratings due to the devaluation of the country’s currency, according to Moody’s Investor Services.
The almost 2% devaluation of the renminbi particularly affects companies with large exposure to the US dollar.
Moody’s estimated that 43 of the largest Chinese developers held 35.5% of their debt in the form of offshore bonds or bank loans.
However, only 14 developers would see their leverage weaken significantly if the currency were to be devalued by 10%.
In two cases, Glorious Property Holdings and Renhe Commercial Holdings, the refinancing of bonds in the coming year put them at significant currency exposure risk.
Simon Wong, associate managing director of Moody’s, said: “It is possible that other factors could counterbalance the impact of a renminbi depreciation, including the potential for further declines in domestic interest rates and the ongoing opening up of the domestic bond market as a funding avenue.”
