Country Garden, Vanke to expose extent of property crisis

EARNINGS from Country Garden Holdings Co and China Vanke Co next week should indicate the extent to which China’s property woes are hurting the world’s second-largest economy.

Country Garden’s cash crunch is getting worse as sales plunge. Its crisis entered a new chapter last month when a Hong Kong court received a creditor’s petition to wind up the company.

The troubles at Vanke threaten to spill over to other developers as China’s housing market stagnates.

The real estate company just secured a 1.4 billion yuan loan from Industrial Bank Co, an incremental step in efforts to stave off its first-ever default.

Property stimulus from rate cuts, reduced down-payment ratios and relaxed home-purchase curbs will probably fail to revive new-home sales amid faltering confidence, Bloomberg Intelligence (BI) analyst Kristy Hung said.

Earnings from Bank of China Ltd, Agricultural Bank of China Ltd, Industrial & Commercial Bank of China Ltd and China Construction Bank Corp should also shed light on where the property crisis is heading.

They maintained benchmark lending rates on Wednesday after the central bank kept rates unchanged.

That’s after loans grew at the slowest pace on record in February, despite earlier monetary and fiscal easing steps.

Banks might become “victims” of the government’s property-rescue measures, BI analysts Francis Chan and Nicholas Ng said, after China pledged to refine real estate policies following proposals outlined to the National People’s Congress earlier this month.

This Monday, China Resources Land’s property leasing business should have boosted 2023 profit, while higher total rental income may offset a shrinking gross margin in the property development business, BI said.

Management may discuss spinning off more assets into commercial real estate investment trusts.

Meanwhile, on Tuesday, BYD expects 2023 net income to have grown as much as 86.5%, the electric vehicle maker said in a preliminary earnings report, as sales for new energy vehicles reached a record. — Bloomberg