China developer shares slide as Evergrande concerns simmer

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SHANGHAI (Businesshala) – Shares and dollar bonds of Chinese real estate firms slipped again on Thursday as investors worried about a debt crisis raging through developers including China Evergrande Group, a day after the sector was hit with a rating downgrade. was killed.

FILE PHOTO: The company logo is seen at the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. Businesshala/Allie Song

Evergrande, which has more than $300 billion in liabilities and 1,300 real estate projects in more than 280 cities, missed its third round of interest payments on its international bonds this week.

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The world’s most indebted developer, which is trying to sell off assets to raise funds, has made little progress toward that goal when Qimi Home Furnishing Group announced in a filing on Thursday that it would buy a 40% stake in Evergrande Group. Will take joint venture for 72 million yuan ($11.18 million).

But some other Chinese developers have also warned they could default, and rising risks on Wednesday led credit agency S&P Global to downgrade two of the sector’s biggest firms, Greenland Holdings – which has earned some of the world’s highest residential Have built towers – and e-houses, and warned it could cut their ratings further.

China’s annual factory gate prices hit record lows in September as raw materials surged, Thursday’s data showed, adding to concerns from investors hoping for a rapid recovery policy easing in the world’s second-largest economy. But growing at the fastest rate. Cost.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said continued inflationary pressures would limit the scope for any monetary policy easing.

“But the most important policy in the property sector is not monetary policy, but regulation relating to leverage and bank credit supply to developers (and) home buyers,” he said.

“So I think the government still has the option of loosening those policies to help the property sector. The big question is whether they are willing to do that. So far their policy stance seems pretty firm.”

On Thursday, a sub-index tracking shares of Chinese property developers ended the day down 3.88%, while the broader CSI300 blue-chip index slipped 0.54%. Asset stocks are down about 20% this year compared to the CSI300’s 5.7% drop.

Analysts at JP Morgan said in a report that China’s asset stocks will remain volatile in the near term.

“News of minor easing is likely to lead to a short-term rebound, which may not be very sustainable due to potential ongoing concerns over the offshore bond market,” he said.

“There may be a more sustainable rally in January 2022 when banks will have more front-loaded quotas for lending to developers/mortgages.”

Graphic: China Asset Share Index –

lightning rod

In China’s onshore bond market, prices continued to remain volatile, with bonds from developer Shanghai Shimao being listed on the Shanghai Stock Exchange with both the biggest gainers and biggest losers of the day.

“Asset bonds are lightning rods,” said the director of a local brokerage. In addition to the risk of loan transition from Evergrande, higher mortgage rates – part of official efforts to rein in the rise in housing prices – are stifling the industry, he said. “Basically, the high turnover of real estate companies is gone.”

In international debt markets, data provider Duration Finance showed that the 6.75% June 2022 bond of Greenland Group Holdings was trading at 60.175 cents, down more than 3 points, and the 14.5% September 2023 bond of Xinyuan Real Estate was trading nearly 8. The point fell to 63.9 cents.

Markets in Hong Kong remained closed on Thursday for a public holiday.

Global concerns spread over the potential for a spillover of credit risk from China’s property sector into the broader economy – or risk premium – on investment-grade Chinese firms, which have the most solid finances, the widest in more than two months. . Wednesday evening US time.

The spread on the equivalent high-yield or ‘junk’-rated index that tracks firms like Evergrande returned on Wednesday, but remained close to all-time highs.

($1 = 6.4391 Chinese Yuan)

Reporting by Andrew Galbraith; Editing by Muralikumar Anantharaman and John Stonestreet


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