China property dives as Kaisa pleads for help, Fed warns of contagion

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SHANGHAI/BEIJING/LONDON (Businesshala) – China’s property sector suffered a fresh rally on Tuesday as the Kaisa group made a desperate appeal for help and the US Federal Reserve sent its first direct warning that the crisis was causing global damage. Can be made.

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Builders’ bonds were resold when sources in China said Kaisa, which was the first developers to default in 2015, told a meeting with a government think-tank and some of the country’s banks and property firms that it would Need help to pay off your loans, workers and suppliers.

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Bonds of other large firms were also faltering, with R&F Properties and China Vanke – seen as one of the sector’s most solid firms due to partial state ownership – seeing their biggest declines on record.

The troubles that flared up hours after the US Federal Reserve warned could pose a global risk.

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It said in its Financial Stability Report, “Given the size of China’s economy and financial system … financial tensions in China could impact global financial markets through a decline in risk sentiment, (and) global economic growth.” could pose a risk to.”

Underscoring the lack of liquidity, Fitch downgraded Cassa near default on Tuesday, citing its deteriorating finances, struggle to sell assets and undisclosed debt at its asset management unit.

“We sincerely ask investors to devote more time and patience to Kaisa Group,” the firm said in a statement on its official WeChat account late Monday.

call for help

Kaisa is only China’s 25th largest developer by sales, but Evergrande, the poster child of the current crisis, has a big bond repayment bill next year.

FILE PHOTO: A photograph shows the Casa Plaza of Casa Group Holdings Limited on a foggy day on November 5, 2021 in Beijing, China. Businesshala/Thomas Peter

It took part on Monday at a meeting with the State Council’s Development Research Center, other developers and lenders in the southern Chinese city of Shenzhen, a well-placed source told Businesshala.

The think-tank makes policy proposals on China’s national development and its economy, but is not a decision-making body.

At the meeting, Shenzhen-based Kaisa urged state companies to help privately run peers by buying some of their projects and making other strategic purchases, the source said.

Those attending the meeting included China Vanke, Ping An Bank, China Citic Bank, China Construction Bank, CR Trust, Southern Asset Management and Developer Excellence Group.

He said that Kaisa had told in the meeting that he was facing a lot of difficulties and some financial institutions had transferred funds from his accounts. It also urged that all lawsuits seeking to freeze their assets be handled centrally in a Shenzhen court, the source said.

Kaisa, Vanke, Citibank declined to comment. Neither Excellence, the other banks participating in the meeting, nor the State Council Information Office immediately responded to requests for comment.

systemic?

China’s wealth crisis rocked global markets in September and October. In mid-October Beijing officials tried to reassure markets that the crisis would not be allowed to spiral out of control, but concerns have resurfaced.

“The problem is that it is getting settled,” said Victor Szabo, London-based EM portfolio manager at ABRDN, “many Chinese property developers can no longer access lending markets and obtain financing.”

“The bigger issue is we don’t know what (Beijing’s) final plan is… and now can you stick to the idea that China can handle it?”

Trading in shares of Cassa and three of its units was suspended last week, a day after an affiliate defaulted on payments to onshore investors.

Evergrande, the world’s most indebted developer, has meanwhile stumbled from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds. .

Another already outstanding bond payment should be made on Wednesday and has coupon payments of more than $255 million on June 2023 and 2025 bonds on December 28.

Beijing is urging government-owned firms and state-backed property developers to buy some of Evergrande’s assets to try to control the decline.

Its shares ended higher on Tuesday after it sold a $52 million stake in Hengten Networks Group, bringing its total fundraising from the sale of its stake in the Chinese Internet service provider to $144 million from Nov.

Separately, shares of smaller developer China Aoyuan jumped more than 6% after Infini Capital told Businesshala on Tuesday that it was accumulating a stake in the firm’s asset management arm Aoyuan Healthy Life Group and now its second largest was a shareholder.

($1 = 7.7840 Hong Kong Dollar)

Reporting by Samuel Shen, Cheng Leng and Tony Munro; Additional reporting by Joy Leung and Claire Jim in Hong Kong and Mark Jones in London; Written by Anne Marie Roantree; Editing by Kim Coghill, Muralikumar Anantharaman and Jan Harvey

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