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Moody's: Rate hike no immediate rating impact on China developers

HONG KONG: Moody's Investors Service says in a new special comment that last week's decision by the People's Bank of China to raise interest rates will have no immediate impact on the ratings or outlooks for its 22 rated Chinese developers.

"We think the rate hike will be credit-negative for the overall property sector, but the impact on our rated developers will be limited," says Kaven Tsang, a Moody's AVP-Analyst.

"An increase in interest rates will raise operating costs for developers, as well as financing costs for homebuyers, which could in turn affect property sales in the coming months."

"But we do not expect any material deterioration in the rated developers' credit or liquidity profiles over the near term because the increase will raise costs only slightly, and because most of the rated developers have benefited from price appreciation and favorable sales of the past year, and many have also raised funds offshore," adds Tsang.

"Concerns about the government's future actions may dampen market sentiment, but the liquidity developers have gained will provide them with the buffers against any temporary slowdowns in sales stemming from a rise in developers' operating costs or homebuyers' financing costs due to the rate hike."

"Over the longer term, we expect that China's property market will still be supported by solid demand given the country's ongoing economic growth and urbanisation," says Tsang.
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