China's property troubles have pushed one debt indicator above levels seen in the financial crisis

Abstract

BEIJING - A measure of risk levels for debt in Asia has surpassed its 2009 financial crisis high, thanks to a surge in downgrades of Chinese property developers since late last year, ratings agency Moody's said Wednesday. Among the relatively risky category of Asian high-yield companies outside Japan that are covered by Moody's, the share with the most speculative ratings of "B3 negative" or lower has nearly doubled from last year - to a record high of 30.5% as of May, the firm said. "For the developer financing, I think the market knows that since the second half of last year the commercial banks turned fundamentally cautions on the sector, especially the private ones," Hans Fan, deputy head of China and Hong Kong research at CLSA, said in a phone interview last week. "With credit conditions tighter today, the US dollar bond market has also remained relatively shut to Asian high-yield issuers." As a result, the agency said that rated high-yield issuance plunged 93% in the first five months of the year from a year ago to $1.2 billion. China's massive real estate sector has come under pressure in the last two years as Beijing seeks to curb developers' high reliance on debt for growth and a surge in house prices. Moody's expects to see more China real estate developers defaulting this year, Moody's Chen said. Real estate investment during the first five months of this year fell by 4% from the same period a year ago, despite growth overall in fixed asset investment, China's National Bureau of Statistics said Wednesday.