Morgan Stanley analysts warned China Vanke’s liquidity is rapidly deteriorating, with its cash coverage ratio falling to a critical 0.33x in the first quarter.
"Addressing liquidity pressure will require faster inventory destocking, more asset disposals and broader refinancing efforts," Morgan Stanley said in a research report that maintained an 'Underweight' rating on the developer's stock.
The bank's analysis shows Vanke's net debt stood at RMB 265 billion in the first quarter, with the net gearing ratio rising to 116 percent. A recently announced disposal of a non-core farming business for more than RMB 3.3 billion is significantly insufficient to cover RMB 9.3 billion of public debt maturing in the coming months, the report stated. The developer's first-quarter revenue declined 24 percent on year to 28.93 billion yuan, according to company filings.
Vanke's crisis is a high-profile example of the stress spreading through China's private development sector, which is grappling with a multi-year collapse in property values. The downturn has triggered what some economists term a "balance sheet recession," as falling home prices—down for 17 consecutive quarters in real terms—have destroyed an estimated $18 trillion in household wealth, suppressing consumer spending. While state-owned lenders have stabilized, reporting modest profit growth by shifting to fee-based income, private firms like Vanke are left exposed as their asset base and land reserves shrink, making a turnaround "increasingly difficult," the report concluded.
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