Zhenro under scrutiny; developer stocks slide: Evergrande update

Zhenro’s shares closed 15% lower.
Image: Andrea Verdelli/Bloomberg

Zhenro Properties Group Ltd. dollar bonds and shares extended declines Monday after plunging last week on concerns about the planned redemption of a note.

Transparency worries are resurfacing in China’s real estate sector as investors try to avoid nasty surprises. Worries about hidden debt and a spate of auditor resignations have prompted a repricing of risk among dollar bonds as creditors reassess developers once deemed relatively resilient to the credit crunch engulfing the industry.

Zhenro’s shares closed 15% lower. The developer said earlier that articles published on the internet about controlling shareholder Ou Zongrong and offshore debt securities were “untrue and fictitious.”

Meanwhile, a Bloomberg Intelligence gauge of developers fell 4.7%, the most in five months. China Vanke Co. Chairman Yu Liang said builders’ income this year “will definitely drop significantly,” according to media reports.

Key Developments:

  • Zhenro Says Articles About Shareholder Untrue, Fictitious
  • China Property Bond’s Rapid 60-Cent Drop Shows Transparency Risk
  • Zhenro PPT Holder’s Shrs Sold Under Enforced Disposal: The Paper
  • Guorui Properties Seeks to Swap 2024 Bond to Extend Maturity
  • Zhenro Is Reminder for China Investors to Be Selective: Natixis

Ronshine Unit’s Yuan Bonds Drop Further Amid Zhenro’s Selloff (2:50 p.m. HK)

Ronshine China Holdings Ltd.’s onshore bonds fell further Monday, with some approaching last month’s record lows amid pressure from the price slump in peer Zhenro’s securities. Unit Rongxin Fujian Investment Group Co.’s 5.6% local bond due 2024 closed down 12% at 43 yuan, according to data compiled by Bloomberg, the biggest decline in 3 months.

China Property Bond’s Rapid Drop Shows Transparency Risk (11:57 a.m. HK)

Zhenro’s spiraling bond and share prices show just how risky it is to invest in Chinese developer notes — even when a repayment looks imminent.

“Bondholders with low risk appetite may not be able to stomach the extreme price volatility in the sector and may decide to exit the industry altogether, evident in the quick reaction by Zhenro’s bondholders who sold without waiting for the company’s clarification,” Bloomberg Intelligence analysts including Andrew Chan wrote in a Monday report.

China Junk Bonds Fall; Zhenro Indicated Down (11:32 a.m. HK)

Chinese high-yield dollar bonds dropped 1 to 3 cents on the dollar Monday, according to credit traders, following three days of gains in a Bloomberg index.

Sunac China Holdings Ltd.’s 6.65% dollar bond due 2024 fell 3.8 cents to 61.8 cents, according to Bloomberg-compiled data as of 11:23 a.m. in Hong Kong, set for the biggest drop in a month.

Shimao Says It Hasn’t Hired Agent to Sell Shanghai Hotel (11:00 a.m. HK)

Shimao Group Holdings Ltd. denied it hired an intermediary to sell its landmark InterContinental Shanghai Wonderland hotel for 2.25 billion yuan ($354 million).

The Chinese developer issued the statement after Yicai reported Sunday that some agents were marketing the luxury hotel at that price. It was among dozens of real estate projects being marketed by Shimao for potential sale, local media the Paper reported last month.

Built into the side of an abandoned quarry, the subterranean hotel features 336 rooms over 18 floors. The bottom two floors are submerged inside a saltwater aquarium.

China Builder Stocks Dip After Downbeat Outlook (10:21 a.m. HK)

Shares of Chinese real estate firms are poised to snap a three-day rally, with a Bloomberg Intelligence gauge of developers falling.

According to media reports of Vanke’s annual meeting, Yu also said the real estate industry is in the “black iron age.”

Zhenro Properties Denies Reports on Holder (9:24 a.m. HK)

Zhenro denied reports on controlling shareholder Ou Zongrong, after Chinese media outlet The Paper said that shares were sold under enforced disposal. The company said articles published on the internet about Ou and offshore debt securities were “untrue and fictitious,” according to filing to the Hong Kong Stock Exchange.

Citi Ends Huarong Trade After 49% Return (8:41 a.m. HK)

A good bet on a Chinese bad-debt manager has run its course, as regulators call on firms such as China Huarong Asset Management Co. to help rescue the property sector.

That’s according to Citigroup analysts, who first recommended buying Huarong’s 5.5% dollar bond due 2025 when it was priced at 72 cents on April 15 last year. They have now closed the trade after it returned 49.3% through last week, according to a note written by strategists including Dirk Willer and Luis E Costa.

China Builder Loans Add Another Source of Uncertainty (7:00 a.m. HK)

Chinese property firms’ upcoming loan obligations look manageable, but their 2021 annual reports could include previously unreported debt and prompt investors to reconsider debt-repayment risks. Real estate companies need to pay or refinance at least $30 billion of loans the rest of this year, according to Bloomberg-compiled data, on top of other borrowings that include almost $100 billion of maturing bonds.

© 2022 Bloomberg

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