Chinese developer Longfor's bonds sink deeper into junk territory as home sales sputter
Longfor Group is the latest firm to see its bonds downgraded further into junk territory, as weakening sales plague China's beleaguered property developers despite the central government's recent support measures to revive confidence.
Advertisement
S&P Global Ratings on Wednesday downgraded Longfor's long-term issuer credit rating to BB from BB+ and its senior unsecured notes to BB- from BB, citing concerns that the company's contracted sales could remain under pressure through next year due to a further depletion of saleable resources.
The company's contracted sales could decline a further 13 per cent this year to 89 billion yuan (US$12.3 billion), the ratings agency said. Longfor's gross profit margin from property development was expected to remain suppressed at 5 to 6 per cent, down from 11 per cent in 2023, as its focus on clearing inventory continued to weigh on profitability, S&P said.
'While we believe the company will be able to reduce adjusted debt of about 10 billion yuan each year in 2025 [and] 2026 using its growing rental and service income, weakness in property development will partially offset this,' wrote S&P analysts Wilson Ling and Edward Chan.
The downgrade comes as China's developers continue to struggle with lacklustre sentiment among homebuyers. The
property market crisis is now in its fourth year after Beijing introduced measures in late 2020 to deleverage developers and deflate a housing bubble.
Advertisement
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
South China Morning Post
3 hours ago
- South China Morning Post
China and Australia ready for ‘more productive' relationship, Beijing's ambassador says
China and Australia are ready to 'move beyond' stabilising relations and aim for 'more productive' economic cooperation, according to Beijing's ambassador Xiao Qian. There could be a 'closer alignment' between the Australian mining and Chinese manufacturing sectors through 'joint exploration, technology sharing and capacity enhancement', Xiao told a trade expo on Thursday. He said both countries had 'highly compatible' development strategies and 'can fully complement each other's strengths, collaborate in a coordinated manner and jointly build green, secure and sustainable' industrial chains. Earlier this week, the Australian mining giant Fortescue announced it had secured an offshore yuan-denominated loan worth 14.2 billion yuan (US$1.98 billion) from a syndicate led by Bank of China to support its decarbonisation plans. China has been Australia's largest trading partner, export market and source of imports for the past 16 years. However, after ties soured in 2019 and 2020, Australian goods were hit by a series of export curbs that Beijing only lifted at the end of last year.
South China Morning Post
4 hours ago
- South China Morning Post
China, No 2 in global computing power, accelerates build-out as AI race heats up
China has vowed an even stronger push to entrench digital infrastructure's role as an economic growth engine, after a rapid 5G roll-out in recent years that has helped lift its computing power to the world's No 2 ranking, trailing only the US. In the five years to June this year, the number of 5G base stations in China had grown fivefold to 4.55 million and the number of gigabit broadband users had risen 34-fold to 226 million, substantially lifting the country's computing power, Liu Liehong, the director of the National Data Bureau, told a news conference in Beijing on Thursday that focused on China's achievements in digital infrastructure development. But the country's data infrastructure development is still in its early stages and it will continue to deploy large-scale facilities and foster a market-driven ecosystem to support the digital economy and scientific and technological innovation, bureau deputy director Xia Bing said at the same news conference. 'We'll continuously build convenient, efficient, autonomous, secure and world-leading national data infrastructure,' he said. China's data industry has become a new growth driver for the digital economy, with more than 400,000 companies generating 5.86 trillion yuan (US$816.4 billion) in output last year – a jump of 117 per cent from the end of the 13th Five-Year Plan in 2020 – according to the National Data Development Research Institute, and it is expected to maintain a high level of growth in the next few years. In eastern China's Yangtze River Delta, which includes some of the country's most developed cities such as Shanghai, Suzhou and Hangzhou, a multi-tier, full-chain data industry ecosystem has taken shape, Liu said.
South China Morning Post
4 hours ago
- South China Morning Post
JD.com quarterly sales beat expectations, but food delivery foray cuts into profit
's revenue grew a faster-than-anticipated 22 per cent in the June quarter, benefiting from government-directed consumer subsidies as well as an aggressive drive into new arenas such as food delivery The Nasdaq-listed shares of China's top online retailer by revenue rose about 1 per cent in pre-market US trading. The Beijing -based company reported sales of 356.7 billion yuan (US$49.7 billion) for the quarter ended June 30, about 6 per cent above projections. Net income halved to 6.2 billion yuan, though that fall was better than feared. Margins dwindled to 1.7 per cent, reflecting the cost of that push into China's food delivery market. ignited a three-way battle in e-commerce this year after hiring and launching promotions to break into the food delivery and instant commerce markets.
