China property sector shares surge on fundraising support
Chinese property developers’ shares and bonds soared on Tuesday ater regulators lited a ban on equity refinancing for listed firms, the latest support measure for a cash-squeezed sector that has been a key pillar of the world’s No.2 economy.
The move will make it easier for developers to obtain fresh funding, analysts said, but reviving demand from homebuyers would remain challenging amid persisting COVID-19 curbs that have triggered rare street protests across many Chinese cities.
The shares and bonds surged ater China
The move will make it easier for developers toobtainfresh funding, but reviving demand fr om homebuyer s would remain challenging
Securities Regulatory Commission (CSRC) said on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed developers, liting a ban in place for years.
The move is the latest regulatory easing as Beijing steps up support for the property business, a sector that accounts for a quarter of the Chinese economy. Many developers have defaulted on debt obligations racked up during a building boom and have now halted construction.
China’s CSI 300 Real Estate Index closed up 9.4 per cent, marking its biggest daily jump ever.
Meanwhile, Hong Kong’s Hang Seng Mainland Properties Index closed 8.1 per cent higher. Shares of Longfor, Agile and China Vanke jumped between 8 per cent and 14 per cent, while Country Garden added 4.5 per cent.
Nomura analysts said they believed sentiment towards the property development sector “should see notable lit due to the continued introduction of policy easing by the central government in the past one month.”
They added, however, ater the latest change, policy easing on the supply side has been “more or less exhausted”, and the central government will have to find ways to boost demand for property.
Reviving property demand would be challenging under the “the recent worsening COVID-19 situation and protests in major Chinese cities, as well as the weakening housing price trends”, the Nomura analysts wrote.
Street protests erupted in cities across China over the weekend, which analysts described as a vote against President Xi Jinping’s ZERO-COVID policy and the country’s strongest show of public defiance during his political career.
Despite the uncertain demand outlook, investors cheered the latest funding support measures.
Yuan-denominated bonds issued by Chinese developers CIFI Group, Shanghai Shimao Co, Guangzhou Times Holdings, Country Garden rocketed between 20 per cent and 40 per cent each on Tuesday.
Dollar bonds also traded up, though gains were milder. A tranche of Country Garden’s dollar bonds due to mature by January 2025 added 5.6 cents. Shares in Chinese investment banks also moved higher on hopes that the latest equity financing relaxation will potentially boost their share underwriting business. Citic Securities edged up by 3.4 per cent in Hong Kong.
On investor appetite for share offerings by developers, a Hong Kong-based capital markets banker, who spoke on the condition of anonymity, said more investors would gradually look at those stocks given the “atractive valuations”.