Chinese Real Estate Debt Draws Investor Attention

A worker walks past a development at a construction site in Beijing, China, on Tuesday, Aug. 21, 2012.

By Isabella Steger

Heavy investor interest in bonds issued recently by China’s recovering real estate sector suggests that the worst could be over for developers.

Despite concerns at the beginning of this year that some developers were at risk of defaulting as a result of government tightening on the real estate sector, things have begun to look up. There has been a surge of interest in high-yield issuances by small to midsize Chinese developers in recent weeks, including bonds by Guangzhou R&F, and Road King Infrastructure and Kaisa Group.

For example, Kaisa Group’s $250 million offering, priced this week, received $3.9 billion of offers, with institutional investors taking up three-quarters of the bonds.

“Given that fixed income investors are traditionally more risk-averse than equity investors, the success of the recent bond issues suggests that the fundamentals of the China property sector are solid,” wrote Citigroup C +0.73% in a note.

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