Fitch lowers Xinhu Zhongbao

Fitch Ratings said it downgraded Xinhu Zhongbao Co., Ltd.'s (XHZB) long-term foreign-currency issuer default rating to CCC+ from B-.

“The downgrade reflects the company's poor sales performance year to date. Fitch believes XHZB's sales and business profile may not be sustained without a broad-based recovery of the property sector, as the company's sales are highly dependent on the launch of its prime Shanghai projects, which will mostly be sold in the next few years. However, a recovery is uncertain, especially in lower-tier cities,” the agency said in a statement.

Fitch noted the company’s nine-month contracted sales for 2023 plummeted by 76% year over year to CNY 2.4 billion, citing delays in project launches.

On the plus side, “We expect sales to improve in 4Q23 to CNY 4 billion-5 billion as XHZB will launch a Shanghai project in December. We expect strong sales for the project as pricing will be regulated and heavily discounted against secondary home prices in the same area,” the agency said.

The outlook is stable.

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