Shares of Chinese real estate firms fell further on Thursday as investors raised concerns about a debt crisis through developers including China Evergrande Group. 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, raising concerns about investors.
The world’s most indebted developer, which is trying to sell assets to raise funds, appears to have made little progress towards that goal. Qumei Home Furnishing Group announced in a filing on Thursday that it would buy 40 stakes in its joint venture of Evergrande Group 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 on Wednesday led to a fresh downgrade on Wednesday for two of the sector’s biggest firms, Greenland Holdings, which has left the world afloat. They have built several of the tallest residential towers and e-houses in the U.S., and have warned that this could further cut their ratings.
New data on Thursday showed that China’s annual wholesale prices rose sharply in September, according to data on Thursday, adding to concerns from investors hoping for a rapid recovery in the world’s second-largest economy. has risen to a record level.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said persistent inflationary pressure would limit the scope of any monetary policy easing.
“But the most important policy in the property sector is not monetary policy, but regulation related to leverage and bank loan supply to developers and home buyers,” he said.
He added, “So I think the government still has the option of relaxing those policies to help the property sector. The big question is whether they are willing to do that. So far their policy stance is pretty firm. Seems like.”
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%. Property shares are down about 19% this year, compared to the CSI300’s 5.5% drop.
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 Company’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. In the international loan market, Agile Group Holdings’ 6.875% perpetual bond declined more than a percentage point to 69.5%.
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