S&P downgrades Chinese property outlook

Standard & Poor’s (owned by McGraw-Hill; MGH.NYSE) rating agency downgraded China’s property development sector to negative, blaming tightening credit markets and a potential fall in sales volumes, the Financial Times reported. “In the near term, what worries us most is the liquidity position of developers, who are facing very tight lending controls,” said Bei Fu, a Hong Kong-based S&P analyst. Many analysts have mooted the possibility of a “price war” among property developers, as tight credit markets and stiffer regulation deprive them of operating cash. S&P’s ratings downgrade follows that of Moody’s (MCO.NYSE) ratings agency, which also gave the sector a negative outlook in April. Residential housing prices rose 17.7% year-on-year in May after a 10% dip in April. But many analysts say the jump is a statistical illusion due to a low base in May last year.