Chinese real estate giants fall due to lack of liquidity

The stocks and bonds of the chinese real estate industry fell to eight-month lows on Monday as fears of a liquidity crisis at two of the country’s largest developers, Country Garden and Dalian Wandaaggravated the crisis of confidence in the sector.

The slump suggests that the troubles that erupted with China Evergrande two years ago have resurfaced and caught up with what many expected to be the biggest and most secure players in a business crucial to the Chinese economy.

Chinese state media reported on Monday that the government “adjust and optimize real estate policies in a timely manner”, but doubts remain, especially after six months of strong selling in the stock and bond markets.

Shares of Country Garden, China’s biggest homebuilder by sales volume, fell 8.7% on Monday and those of its services division plunged nearly 18%.

Many of its bonds suffered their biggest drop in international markets in more than a year, to trade at just 10-15% of their original nominal value, raising fears of a type of default. evergrande.

Your rival’s actions longfor fell 8.5%, while Wanda’s asset sales failed to lift the price of its bonds as investors waited to see if cash would suffice for bond investors.

The guidelines that promote the “urban redevelopment” released late on Friday disappointed investors, but there were signs of a more significant turnaround on Monday at a Politburo meeting that was held a few days earlier than most China watchers had expected.

Before the Politburo statement, the mainland China Promoters Index fell 6.4% on Monday, posting its worst session of 2023.

Country Garden It is a giant with thousands of projects in nearly 300 Chinese cities. Last week, the refinancing of a 2019 loan surprised and unsettled investors, following a spate of downgrades to the company’s credit rating.

The bonds traded on the stock exchange Country Garden they fell on Monday to less than half their face value and dollar-denominated ones, often owned by international investors, to between a third and 10 to 15 cents on the dollar. .

WandaChina’s largest retail developer, was also looking for liquidity at one of its subsidiaries to meet an already late coupon payment that was due before the end of a grace period on July 30.

The company sold part of another subsidiary to the streaming company china ruyi for $320 million, which, according to a source familiar with the matter, would help him repay another $400 million bond.

the promoter Greenland Holdingsbacked by the state, has defaulted on its payments again this month, while Sino-Ocean Group has asked bond investors to extend the terms of one of its 2 billion yuan ($278 million) bonds that matures on August 2.

The renewed pressure on the sector comes at a time when home sales in China have remained depressed, despite the fact that the country this year lifted most of its movement restrictions imposed during the COVID-19 pandemic.

Source: Reuters