China's property trusts wary of funding projects

[SHANGHAI] Property trusts are funnelling the least amount of money into Chinese developers in almost five years as maturing debt balloons, escalating default concerns.

Issuance of trusts for real-estate projects, which target wealthy individuals, slid to 30 billion yuan (S$6.17 billion) this quarter from 67.8 billion yuan in the three months to June 30, the least since the start of 2010, data from research firm Use Trust show. Borrowing costs are rising as developers face US$9.1 billion in bonds and loans maturing by year-end. Hubei Fuxin Science & Technology sold AA rated securities with a 9.2 per cent coupon on Aug 26, above the 6.38 per cent average yield for similar-rated notes.

Cash from operations are also facing a squeeze as home sales fell 10.9 per cent in the first eight months of the year in the world's second-largest economy, which is forecast by the government to expand at the slowest pace in 24 years. Standard & Poor's sees a risk that a developer may default in the coming 12 months, highlighting weak earnings at Renhe Commercial Holdings and Glorious Property Holdings.