China property shares pummelled by widening impact of Evergrande crisis

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SHANGHAI (Businesshala) – Shares of Chinese real estate firms fell on Thursday as investors raged about a debt crisis raging through developers including China Evergrande Group, a day after the sector was hit with a fresh rating downgrade .

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, this week missed a third round of interest payments on its international bonds, leaving investors stunned.

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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 recently warned they could default, and rising risks at sector-led ratings agency S&P Global prompted two of the sector’s biggest firms, Greenland Holdings on Wednesday to deliver fresh downgrades – which have built some of the world’s tallest residential towers – and e-houses, and warned it could cut their ratings further.

New data on Thursday showed China’s annual factory gate prices hit their fastest pace at record levels in September, adding to concerns from investors hoping for a rapid recovery policy easing in the world’s second-largest economy. growing from. material prices.

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 fell nearly 3% by noon, while the broader CSI300 blue-chip index slipped 0.31%. Asset shares are down about 19% this year compared to the CSI300’s 5.5% drop.

Price action in the onshore bond market remained relatively low after large volatility in recent sessions. Guangzhou R&F’s 6.7% April 2022 exchange-traded bond rose 0.34% but was still trading at a discount of more than 35% from its face value.

Shanghai Shimao Co.’s 4.65% January 2022 bond was the biggest loser among Shanghai Stock Exchange-traded corporate bonds, falling 3.16% to 92.48 yuan, according to exchange data.

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

Global concerns over the potential for the spread of credit risk from China’s property sector to the broader economy – or risk premium – on investment-grade Chinese firms, which have the most solid finances, on Wednesday evening neared its widestness in more than two months. American 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

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