Hungry for funds to pay for land and finish projects, listed Chinese developers will try to issue convertible bonds in coming months, while unlisted rivals could struggle if they fail to launch initial public offerings (IPO).

Anthony Ryan, JPMorgan's top property banker in Asia, said investors are regaining a taste for China's property firms, although doubts linger because of slowing Chinese home sales and fragile global capital markets.

Apartment sales fell by about 50 percent in Beijing, Shanghai and Shenzhen in July from a year earlier, fuelling expectations developers will soon be forced to slash prices.

"In the final quarter you'll see some transactions," Ryan told Reuters in an interview. "Select hedge funds and dedicated property funds are prepared to do their work for large convertible bond and equity placements," he added.

"A lot of them are saying they believe the bottom is near, and they're willing to commit significant capital for the right transaction."

Shares in most developers have fallen about 70 percent since a peak last November as government measures aimed at cooling the housing market began to bite. The likes of Greentown China Holdings Ltd and Shanghai Forte Land Co Ltd are now trading at around 60 percent discounts to their net asset value (NAV).

The share price slide and rocky markets have deprived the listed firms of equity placements and forced the delay of IPOs planned by as many as 30 developers.

Meanwhile, the high-yield bond market has also been shut since Chinese developer Country Garden scrapped a $1 billion issue in November.

The costs of protecting against defaults by Chinese borrowers have soared. Shimao Properties' credit default swaps, which were cut to junk status by ratings agency Moody's in July, are trading at 1,234 basis points.

Reuters

(HK Edition 09/04/2008 page2)