SHANGHAI, Oct 14 (Reuters) - Shares and dollar bonds of
Chinese real estate firms slid again on Thursday as investors
fretted about a debt crisis rippling through developers
including China Evergrande Group, a day after the
sector was hit with rating downgrades.
Evergrande, which has more than $300 billion in liabilities
and 1,300 real estate projects in over 280 cities, missed a
third round of interest payments on its international bonds this
The world's most indebted developer, which has been trying
to sell assets to raise funds, appeared to have made small
progress towards that goal when Qumei Home Furnishings Group
announced in a filing on Thursday that it will buy
out Evergrande group's 40% stake in their furnishings joint
venture for 72 million yuan ($11.18 million).
But some other Chinese developers have also warned they
could default, and rising risks on Wednesday led credit agency
S&P Global to downgrade to two of the sector's bigger firms,
Greenland Holdings - which has built some of the
world's tallest residential towers - and E-house, and
warn it could cut their ratings further.
Adding to the concerns of investors who have increasingly
been hoping for policy easing to stabilise a wobbly recovery in
the world's second-largest economy, data on Thursday showed
China's annual factory gate prices rising at the fastest pace
on record in September due to soaring raw material costs.
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 the regulation related to leverage and bank
loan supply to developers (and) home buyers," he said.
"Therefore I think the government still has the option to
loosen those policies to help the property sector. The big
question is whether they are willing to do so. So far their
policy stance seems quite firm."
On Thursday, a sub-index tracking shares of Chinese property
developers ended the day down 3.88% while the broad
CSI300 blue-chip index slipped 0.54%. Property shares
have fallen nearly 20% this year, compared to a 5.7% fall for
China property shares would remain volatile in the near
term, JPMorgan analysts said in a report.
"News on marginal easing will likely cause a short-term
rebound, which, however, may not be very sustainable due to the
likely ongoing concerns on the offshore bond market," they said.
"A more sustainable rally may happen in January 2022 when
banks have more front-loaded quota to extend credit to
In China's onshore bond market, prices underscored continued
volatility, with bonds of developer Shanghai Shimao
listed among both the biggest gainers and biggest losers on the
day by the Shanghai Stock Exchange.
"Property bonds are lightning rods," said a director at a
local brokerage. Apart from the risk of debt contagion from
Evergrande, higher mortgage rates - part of official efforts to
rein in surging housing prices - are hitting the industry, he
said. "Fundamentally, the high turnover of real estate companies
In international debt markets, data provider Duration
Finance showed Greenland Group Holdings' 6.75% June 2022 bond
was trading down more than 3 points at 60.175 cents, and Xinyuan
Real Estate's 14.5% September 2023 bond slumped nearly 8 points
to 63.9 cents.
Markets in Hong Kong were closed on Thursday for a public
Global worries over the potential for spillover of credit
risk from China's property sector into the broader economy kept
spread - or risk premium - on investment-grade Chinese firms
, which tend to have the most solid finances, near its
widest in more than two months on Wednesday evening U.S. time.
The spread on the equivalent high-yield or 'junk'-rated
index that tracks firms such as Evergrande pulled
back on Wednesday, but remained close to all-time highs.
($1 = 6.4391 Chinese yuan)
(Reporting by Andrew Galbraith; Editing by Muralikumar
Anantharaman and John Stonestreet)