HONG KONG, Jan 20 (Reuters) - Stocks and bonds of Chinese
property developers stretched their gains into Thursday on hopes
a slew of recent government measures would help ease a funding
squeeze in the embattled sector, even as another developer
warned of default.
Beijing unexpectedly lowered borrowing costs on its
medium-term loans for the first time since April 2020, and cut
its benchmark lending rates for corporate and household loans
for a second straight month.
Sources have told Reuters that policymakers were also
drafting nationwide rules to make it easier for developers to
access funds from sales still held in escrow https://www.reuters.com/world/china/exclusive-china-drafts-rules-ease-property-developers-use-escrow-funds-sources-2022-01-19
Better access to escrow funds would improve short-term
liquidity and help developers buy time "to meet their debt
repayments until property sales show meaningful recovery,"
expected in late March or April, brokerage Jefferies said.
Citi agreed that improving mortgage and potential easing of
escrow accounts "could help avoid the worst scenario," but it
cautioned there were still short-term overhangs including
expected sales decline in the first quarter and a few more
developers seeking offshore bond extensions.
The Hang Seng Mainland Properties Index closed 4.6%
higher, up for a third straight day, led by property firms
deemed facing liquidity pressure.
Sunac China surged 15.2%, while Kaisa Group
jumped 13.3%. Shimao Group and Logan Group
rose 12.1% and 10.1% respectively.
Sunac's April 2024 dollar bond rose to 63.5
cents on the dollar in late afternoon Asian hours, data from
Duration Finance shows, versus 41.8 a day ago. Its three yuan
bonds also surged 20% during the morning, prompting temporary
The bonds rallied even as Fitch downgraded Sunac to "BB-"
from "BB," with a negative outlook, citing decreasing financial
flexibility amid high capital-market volatility.
Sunac has transferred 4.25 billion yuan ($670 million) to
pay for its two onshore debts coming due in the next three
weeks, a person close to the company said.
Sunac declined to comment.
Shares in Guangzhou-based China Aoyuan also
reversed early losses to climb 3.2%, even though the developer
said late on Wednesday it planned not to make principal and
interest payments for all its offshore debt, and was working on
a restructuring proposal.
Financial media outlet Cailianshe reported on Thursday the
provincial and city governments where Aoyuan is based had
stepped in to resolve its debt crisis, and the developer may
hand its largest shareholder position to a state-owned
Regulatory curbs on borrowing have driven the sector into
crisis, highlighted by China Evergrande Group which
was once China's top-selling developer but is now the world's
most indebted property firm with liabilities of $300 billion.
In recent months, Beijing has taken steps to restore
stability, including making it easier for state-backed
developers to buy up distressed assets https://www.reuters.com/business/shimao-group-unit-talks-with-lender-missed-trust-loan-payment-2022-01-07/#:~:text=SHANGHAI%2FHONG%20KONG%2C%20Jan%207,liquidity%20crisis%20in%20the%20sector
of indebted private firms, according to a source.
"Overall, we find improved top-level policy clarity since
December as a downside protection, and impending measures to
protect the real estate sector will bring a healthier 2022 than
2021," Citi said in its report.
($1 = 6.3432 Chinese yuan)
(Reporting by Clare Jim Editing by Himani Sarkar and Mark