Moody's said that a measure of risk for debt in Asia has surpassed its high from the financial crisis.
As of May, the share of companies with the most speculative ratings of B3 negative or lower had doubled from last year, to a record high of 30.5%.
The share was higher in May 2009, when it was 27.3%, according to the report. Only three Chinese property developers were involved in that risky share in that year.
It is not known if the new record shows a financial crisis is imminent.
High-yield bonds are riskier than investment grade bonds. The lowest rating for a category that indicates assets that are speculative and are subject to high credit risk is B3.
The new high in risky ratings was caused by a series of downgrades on Chinese real estate developers who were worried about their ability to repay their debts.
In the last nine months, Moody's has lowered the credit ratings for Chinese property developers.
The agency said that it only issued 56 downgrades for such companies in the last 10 years.
The report noted that some Chinese developers have had their bonds lowered multiple times. The Moody's "B3 negative" or lower list includes Evergrande and several others.
Kelly Chen, vice president and senior analyst at Moody's Investors Service, said in a phone interview that the current tough operating environment for China property developers combined with a tight funding environment for all of them is what led to the rating being lowered.
The effect of the supportive policies will likely be seen in the second half of the year.
The central Chinese government and local authorities have made it easier for people to buy apartments in different cities by cutting mortgage rates.
Hans Fan, deputy head of China and Hong Kong research at CLSA, said that since the second half of last year the commercial banks turned fundamentally cautions on the sector.
He said that some cautiousness is still present. He said that the banks are lending more to the state-owned enterprises. That is encouraging.
Beijing urged support for local governments in improving real estate conditions at a Politburo meeting in April. The leaders said that houses are for living in.
Real estate developers in China face a tough financing environment.
The US dollar bond market has historically faced challenges for companies rated B3N and lower. The US dollar bond market has been relatively shut to Asian high-yield issuers.
The agency said that rated high-yield issuance plummeted in the first five months of the year from a year ago.
China's massive real estate sector has come under pressure in the last two years as Beijing seeks to curb developers' high reliance on debt for growth
Billions of dollars in U.S. dollar-denominated debt have been issued by many developers. The Chinese economy is the second largest in the world.
In December, Evergrande did not pay their bills. A number of Chinese real estate developers have failed to make interest payments.
More China real estate developers are expected to default this year. More than 50 names in the industry are covered by the agency, and more than half of them have a negative outlook.
Real estate and related sectors make up 28% of China's gross domestic product, according to the firm. On Tuesday, Moody's cut its forecast for China's GDP growth to 4.5% from 5.2%, due to the impact of Covid-19, the property market downturn and geopolitics.
The data shows the real estate market is subdued.
Despite growth in fixed asset investment, real estate investment fell 4% in the first five months of this year.
Property prices in 70 Chinese cities were little changed in May from a year ago, according to an analysis of official data.
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