Fitch Rpt: Credit otlk for ppty developers in China

Property developers across several emerging markets face severe challenges as their liquidity positions are under increasing stress and property prices trend downward, according to a Fitch Ratings report. The report specifically analyzes the outlook for developers in Brazil, China and Russia.

Since mid-2008, most emerging market property developers have faced increasingly challenging operating conditions amid the deterioration of the global economy. Declining equity markets have led to substantially weakened investor sentiment, which in turn has applied pressure on the housing markets in these three countries.

The situation is more acute in Russia and Brazil. Although circumstances and severity can vary by region, developers in both countries are, in general, experiencing a steep drop in volumes, declines in cash flow and a reliance on short-term funding. Government-initiated support in these countries has been limited.

By contrast, market conditions in China are moderately better. Furthermore, property developers in China maintain solid access to the domestic banking system, and have a superior liquidity position supported by a largely state-owned banking system and less negative market outlook. For these reasons, as well as the pick up in transaction volumes in 2009, Fitch has not taken negative rating actions on any Chinese developers, as opposed to Brazil and Russia where Fitch has taken a number of rating actions since Q2 2008.