Developers soar on China’s easing proposals: Evergrande update

Chinese property stocks and bonds rallied for a second day after the central bank pledged to use more monetary policy tools to spur the economy.
Image: Bloomberg

Chinese property stocks and bonds rallied for a second day after the central bank pledged to use more monetary policy tools to spur the economy. The sector extended gains near the end of trading on reports that China may make it easier for firms to tap pre-sale funds deposited by homebuyers.

Country Garden Holdings Co., the country’s largest developer, led gains as shares rose more than 8% in Hong Kong, the most in four months. The company’s 6.5% note due in 2024 rose 12.9 cents on the dollar to 91 cents. Several dollar bonds were set for record one-day gains including Sunac China Holdings Ltd.

More broadly, Chinese sovereign bonds defied a global debt rout after the People’s Bank of China cut rates Monday for the first time in almost two years and pledged to ease credit stress.

Key Developments:

  • China’s Spreading Property Debt Crisis Pressures Xi to Ease
  • CHINA REACT: PBOC Signals Steady Property, Flexible Yuan
  • Why Hidden Debt Is a Big Problem for China Developers: QuickTake
  • Chinese Builder Agile Group Downgraded on Liquidity Concerns
  • Property Sector Contraction in China Worsens in Blow to Economy
  • Find Prospective Buyers to Save Weak Chinese Developers in M&As

China Considers Easing Developer Cash Crunch With Presale Funds (6:43 p.m. HK)

Confirming earlier reports, people with knowledge of the matter said Chinese regulators are considering lifting some restrictions on developers’ access to cash from presold properties tied up in escrow accounts.

Regulators including the housing ministry and the banking watchdog are still discussing details and may convey the instructions through window guidance to local governments later this month, said the people, asking not to be identified because the talks are private. Authorities are contemplating a package of policies to prevent a deepening of the real estate crisis, one of the people said.

Sunac Sells Stakes in Several Property Projects to SOEs: Cailian (6:39 p.m. HK)

Sunac sold a 40% stake in the second phase of a resort project in southwestern China’s Kunming city to Huafa Group for 1.4 billion yuan, Chinese media outlet Cailian reported, citing sources. Sunac also recently sold stakes in two projects in Wuhan city respectively to Beijing Capital and Wuhan Urban Construction Group, according to the report. Sunac didn’t immediately comment when reached by Bloomberg.

China Set to Ease Use of Presale Funds, Reuters Says (4 p.m. HK)

China is drafting rules to make it easier for developers to access cash from property presales held in escrow accounts, Reuters reported, the latest move to ease a liquidity crunch in the embattled industry.

The new rules would help developers meet debt obligations, pay suppliers and finance operations by letting them use the funds in accounts that are currently controlled by the municipal governments with no central oversight, Reuters reported, citing unidentified people with knowledge of the matter.

Developer Shares Gain as PBOC Vows to Maintain Stability (11 a.m. HK)

Shares of Chinese real-estate developers rose after the central bank moves. A Bloomberg Intelligence gauge of Hong Kong and mainland-listed developers jumped 4.2%, the most in two months. The Shanghai Stock Exchange Property Index increased for a third day.

PBOC Pledges More Tools to Avoid Collapse (8 a.m. HK)

China’s central bank pledged to use more monetary policy tools to spur the economy and ease credit stress.

The People’s Bank of China will “open monetary policy tool box wider, maintain stable overall money supply and avoid a collapse in credit,” Deputy Governor Liu Guoqiang said Tuesday at a briefing in Beijing.

The central bank will roll out more policies to stabilize economic growth, front-load actions and make preemptive moves, he said. It will address common concerns in the market in a timely manner and stay ahead of the market curve, he said.

unac Has Returned Guarantee Funds (7:55 a.m. HK)

A regional unit of Sunac China Holdings Ltd. has repaid 30 million yuan ($4.7 million) of guarantee funds to Strongteam Decoration that was due December 30, according to an exchange filing from Strongteam Decoration. Strongteam had earlier said the funds had not been paid.

China Bond Rally Gathers Steam on Easing Bets (7:50 a.m. HK)

China’s sovereign yield curve is poised to bull steepen as the nation’s bonds extend an advance on expectations the central bank will continue cutting official rates while its global peers tighten policy.

Investors are positioning for the People’s Bank of China to lower rates further in the next few months after Monday’s decision to slice 10 basis points off its one-year policy loans — the first reduction since April 2020 — and to trim its seven-day reverse repurchase rate.

While the Federal Reserve is shifting its focus to heading off inflation, Chinese authorities are more concerned about propping up growth as they deal with the fallout from a crisis in the property market, weak private consumption and the risk of bigger coronavirus outbreaks. The PBOC is also expected to pump extra liquidity into the banking system before the Spring Festival holiday week starting January 31.

© 2022 Bloomberg

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