Strong sales mean yuan depreciation is not a problem for Chinese developers with foreign debts, Moody’s says

Most Chinese property developers could withstand anything up to a 10 per cent depreciation in the yuan, because resilient sales will offset the cost of foreign debts, according to Moody’s Investors Service.

While home sales improved in the past two months in mainland China, not many developers were issuing bonds because of tighter regulatory scrutiny, according to the rating agency.

The offshore Chinese yuan has weakened 3.7 per cent against the US dollar so far this year, the second-worst performer in Asia, as the trade war and a slowdown in growth drag it down.

“The developers’ strong revenue and earnings over the next 12 to 18 months will provide a buffer against the negative effect of a depreciation of the [yuan] against the US dollar, while the portion of debt denominated in [yuan] also remains far larger than foreign currency debt,” said Danny Chan, an analyst at Moody’s.

Property sales increased 11 per cent from a year earlier in August, accelerating from an 8 per cent gain in the previous month, according to Moody’s.