BEIJING – According to reports, one of China’s healthiest real estate developers has defaulted, indicating that this debt-ridden industry will face greater pain.
Shimao Group After Reuters reported that real estate developers had failed to repay trust loans in full, stock prices fell briefly by more than 17% on Friday. A subsidiary of the company subsequently stated in a document that it was negotiating to resolve the payment issue. The Hong Kong stock market closed down more than 5%, while most major developers rose on the day.
As Beijing has sought to reduce developers’ dependence on debt in the past two years, China’s huge real estate industry is under pressure.In the past few months, global investors have focused on China EvergrandeAbility to repay debts and potential spillover effects on the Chinese economy.
In recent months, other developers have also begun to report financial pressure. But Shimao’s troubles are also prominent.
“Compared with other developers, the reason why the market is more worried about this case is [fell] get into trouble [is] Because Shimao is considered to be…a relatively healthy name,” Natixis Asia Pacific economist Gary Ng said in a telephone interview on Friday.
He pointed out that Shimao meets all three main requirements of Beijing’s debt levels for developers-the so-called “three red lines” policy, which imposes restrictions on debt related to the company’s cash flow, assets, and capital levels.
Ng also stated that the company’s dilemma reflects the greater pressure of business transformation in the current environment.
Source: CNBC, news report
In addition, smaller competitors Guangzhou R&F Properties It was revealed earlier this week that it There is not enough money to buy back the bonds. The company attributed the shortage to its failure to sell assets.
According to Natixis’ proprietary analysis, the market’s sentiment towards Chinese real estate developers has become increasingly negative in the past few months.
The analysis found that before the broader market began to pay attention to Evergrande, only 15% of developers in the market held a negative view in June.
As Evergrande stopped paying investors on time and more and more developers began to report financial difficulties, this figure jumped to 35% in December.
Natixis’ Ng also pointed out that data on trust loans shows that real estate companies are finding it increasingly difficult to raise funds. He said that although the total capital of China’s trust category has risen, the share of real estate has fallen from 15% at the end of 2019 to 12% in September 2021.
“future, [I] We won’t be surprised if there are more defaults besides bonds, loans and different types of products,” Wu said.
He said the most likely way Alleviate investor concerns about the industry It will be news of the state support fund injection.
Evergrande defaulted in early December without the market shock that investors had worried about a few months ago. But the entire industry has been in a more difficult situation.
“Although the central government and some local governments are implementing loose policies
Measures, China’s property market did not substantially improve in December; this is especially true in lower-tier cities,” Nomura analysts said in a January 4 report.
The company estimates that Chinese developers will face US$19.8 billion in maturing offshore USD-denominated bonds in the first quarter and US$18.5 billion in the second quarter. The amount due in the first quarter was almost double the 10.2 billion US dollars in the fourth quarter. According to Nomura.