Attention Speculators: A-Shares Yes, Housing No

iFeng: 开发商的苦日子要来了！住建部央行座谈房企，信息量很大

The era of financing "strong supervision" has arrived! Can the real estate company's capital chain be able to carry it?

Recently, silver CIRC Chairman, Party Secretary Guo Shuqing, the central bank issued a document in the "Seeking Truth" magazine made it clear that: Housing estate bubble is the biggest "gray rhino" threat to financial security.

In fact, the "strong supervision" on financing of housing companies is becoming a norm. The running grey rhino has been put on the reins of financing.

The 21st Century Business Herald recently reported exclusively that the regulatory authorities have introduced new regulations to control the growth of interest-bearing debt of real estate companies and set "three red lines". Specifically, red line 1: the debt-to-asset ratio after excluding advance receipts is greater than 70%; red line 2: net debt ratio is greater than 100%; red line 3: cash short-term debt ratio is less than 1 time.

According to the situation of the "three red lines", the real estate companies are divided into four levels of "red, orange, yellow, and green" . Taking the scale of interest-bearing liabilities as the objective of financing management operations, the grading is set as the threshold for the growth rate of the scale of interest-bearing liabilities.

Analysts expect developers will begin inventory reduction if the government tightens regulations and credit access:

The aforementioned real estate companies pointed out that if the financing policy becomes stricter, the strategy of many real estate companies will gradually change from being aggressive to shrinking. And some real estate companies that have already seen high debts may face a tight capital chain.

It is reported that on the basis of achieving a new high in sales last year, many companies still raise their sales targets for this year. For this reason, the market has recently set off a land acquisition boom. In some second-tier cities, the land premium rate has risen again.

Pan Hao, a senior analyst at the Shell Research Institute, pointed out that if the financing threshold for real estate companies is raised, real estate companies that are restricted by the new regulations on financing may delay or cancel their recent land investment plans, and the land market will likely cool down.

But at the same time, the tightening of financing has sharply increased the pressure on the real estate company's sales and payment end, and the real estate company will most likely start the "accelerated sales model."

iFeng: 楼市调控重磅！住建部、央行等部门立新规，目标锁定重点房企

Help curb the radical expansion of real estate companies

Experts said that the real estate market has recently become more enthusiastic, housing prices in some cities have seen rapid rises, and the land market has been active. Appropriate adjustment of financing policies will help curb the radical expansion of real estate companies and prevent the accumulation of debt risks. In this process, some real estate companies with excessive financial leverage and poor ability to pay back may face challenges.

In fact, many regions have already tightened real estate regulation, many of which involve real estate financing policies. For example, Xianyang City in Shaanxi Province issued a notice requesting to strengthen the review of the source of funds for development and purchase of land, and prohibiting real estate development companies from raising funds through bank loans, trust funds, insurance funds, capital market financing, asset management plan allocation, bond issuance, etc. Pay the land bidding deposit, deposit and subsequent land transfer price.

Sun Binbin, chief fixed income analyst at Tianfeng Securities, pointed out that with the economic recovery, housing prices in first-tier cities and some hot second-tier cities have seen a significant upward trend recently. At the same time, the land market continues to be active. On the one hand, it shows that the real estate companies are not tight at present, on the other hand, it may further stimulate the expectation of rising housing prices. The rapid recovery of real estate sales has driven residents' mid- to long-term credit to continue to increase on a large scale, and the problem of excessive occupation of financial resources by real estate may once again cause concern.

Debt financing of some real estate companies will be affected

Many experts said that under the key real estate enterprise fund monitoring and financing management rules, some real estate enterprises' debt financing data will be affected to some extent.

Yang Yewei, chief fixed income analyst at Guosheng Securities, believes that the scale of credit bond issuance in the real estate industry in July reached 64.2 billion yuan, a record high. At the same time, since the second quarter, many places have imposed penalties for the illegal flow of funds to the property market.

The China Banking and Insurance Regulatory Commission has also repeatedly emphasized in recent times to resolutely prevent the resurgence of "shadow banks", the resurgence of real estate loans, and the recurrence of blind expansion and extensive operations.

An analyst from China Securities Securities stated that it is difficult for real estate companies to expand their business scale by borrowing debts, and part of the debt repayment also needs to rely on sales returns. This will directly affect the external cash flow and operating decisions of real estate companies, prompting real estate companies to speed up cash Receiving payments and reducing leverage have a greater impact on high debt ratio real estate companies and real estate companies that rely on bond financing, while the impact on the solvency of top stable real estate companies is relatively limited.

Meanwhile, the ChiNext index will see it's first batch of IPOs following a rules revamp in June. Stocks can also fluctuate 20 percent per day at of August 24, double the prior limit.

Reuters: Companies line up to list on ChiNext on Aug 24 under new IPO rules

The first batch of companies registered for listing on Shenzhen’s start-up board ChiNext under a revamped initial public offering (IPO) system will make their debuts on August 24, the Shenzhen Stock Exchange said on Friday.

China introduced a U.S-style IPO system to the ChiNext in June, as part of efforts to reform the country’s stock markets and channel capital to start-ups.

The exchange did not say how many companies will list on August 24, but at the end of Friday, 23 firms had registered at the China Securities Regulatory Commission (CSRC) for a ChiNext listing, ChiNext’s website said.

They include software maker Tansun Technology Co, Academy of Environmental Planning and Design, and digital equipment maker Shenzhen Jame Technology Corp.

The context of the policy shift includes the U.S.-China trade dispute. Chinese companies could be delisted from U.S. markest if they do not comply with SEC regulations. China has neglected its capital markets in recent years, but the trade war has spurred renewed focus on reforming and opening equity markets for entrepreneurs. iFeng: “深圳这个政策一出台，中美技术战争又升级”

Reuters believes that Chinese technology companies are facing increasing US scrutiny and the risk of delisting from the US market. With the establishment of the Science and Technology Innovation Board, China's expanding IPO reform will help increase the attractiveness of China's capital market.

The report quoted PricewaterhouseCoopers' global TMT industry leader Wilson Chow as saying that this reform has "very strong competitiveness" in attracting potential listing targets in the Shanghai and Shenzhen markets.