Breaking News
Investing Pro 0

China property stocks surge on fundraising support; COVID protests cloud demand

Economy Nov 29, 2022 08:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Surveillance cameras are seen near residential buildings under construction in Shanghai, China July 20, 2022. REUTERS/Aly Song
 
C
+0.13%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
HK50
-0.52%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Xie Yu and Jason Xue

HONG KONG/SHANGHAI (Reuters) -Chinese property developers' shares and bonds soared on Tuesday after regulators lifted 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 after China Securities Regulatory Commission (CSRC) said on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed developers, lifting 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 and have now halted construction.

Hubei Fuxing Science and Technology Co said late on Tuesday it plans to launch a private placement of shares to fund real estate development, becoming the first China-listed developer to announce such a move after lifting of the ban.

The company will target 35 investors in the share sale, which will not exceed 30% of the current capital base, it said in an exchange filing. That size is worth as much as 1.37 billion yuan ($191 million) as per its current market value.

China's CSI 300 Real Estate Index closed up 9.4%, marking its biggest daily jump ever.

Meanwhile, Hong Kong's Hang Seng Mainland Properties Index closed 8.1% higher. Shares of Longfor, Agile and China Vanke jumped between 8% and 14%, while Country Garden added 4.5%.

Nomura analysts said they believed sentiment towards the property development sector "should see notable lift due to the continued introduction of policy easing by the central government in the past one month."

They added, however, after 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.

YUAN BONDS ROCKET

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% and 40% 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% 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 "attractive valuations".

"Most of the funding channels the property developers need are covered now," said Gary Ng, senior economist at Natixis. He said lifting the equity financing ban was a major move, after Beijing expanded a financing programme to support bond issuance.

"It is now up to whether the market, or basically the state players will actually support the sector," he said. If funds could be raised from state-backed investors, there will be meaningful consolidation in the property sector, Ng said.

Analysts from China International Capital Corp said listed developers were likely to receive "sustained benefit".

"Good quality developers will improve their operational cash flows and balance sheets... while some financially weaker developers might be acquired or merged," they said.

POSITIVE SUPPORT

Beijing suspended refinancing by listed property firms in August 2009 as part of its attempts to control surging home prices.

Regulators briefly lifted the suspension by granting approval to refinancing requests by a selection of property firms starting from 2013, but reimposed restrictions in 2016 to curb housing prices.

As per the CSRC's guidelines issued on Monday, eligible listed developers will be allowed to issue shares to buy property-related assets, replenish working capital or repay debts.

Listed developers can also now seek regulatory approval for merger and acquisitions, and access related financing.

Citigroup (NYSE:C) analysts wrote in a research note on Tuesday that the lifting of the ban on equity refinancing was "another significant positive support" for the sector's liquidity and facilitates the introduction of new strategic investors.

China property stocks surge on fundraising support; COVID protests cloud demand
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email