S&P kiss of death for Chinese property sector?

The FT reports that S&P have upgraded their outlook for the Chinese property sector to stable on the back of strong sales and house prices and stable financing for developers. But given S&P's ratings form in recent years, is this really a good sign?

In some ways many measurements of risk are usually counter to reality, with risk at its highest level precisely when it is perceived to be lowest.  Ratings agency almost aways miss the boat as well and are a lagging indicator of risks to whatever they are rating.

To be sure, for those looking for those critical investment inflection points, perhaps this is one of those signs that things are too good.  This coupled with the announcement of property curbs may suggest the best of Chinese housing market performance is now behind us.

This view might be a little too clever and not all of the better news for housing developers comes from better market activity.  Developers are in better financial shape than a few years ago, reducing loans as a proportion of funding and lifting self-raised funding.  This reduces the risk of a leverage induced meltdown if markets turn down.

But we may be getting close to the point to where good news in this sector is bad for markets as it leads to government tightening.

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