The government is unlikely to ease its curbs on the property sector, despite the recent speculation, according to Nomura Holdings.
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“Beijing’s hawkish stance on the property sector remains intact,” Nomura analysts led by Ting Lu wrote in a note dated on Monday. “We expect Beijing to maintain its property-related tightening measures and a rapid weakening of the property sector to deal a severe blow to headline GDP growth and government revenue.”
The government has so far maintained strict rules that force indebted developers to reduce leverage, as well as measures aimed at preventing a bubble in home prices.
The result is refinancing debt is becoming increasingly difficult for the sector, with junk-rated or unrated real estate firms selling the least amount of notes in the third quarter since late 2017. At the same time, sales of homes are plunging. Major developers recorded a 30% drop in sales in September from a year earlier, Jefferies analysts said in a note, citing China Real Estate Information Corp data.
Fantasia failed to repay a $US205.7 million bond that was due on Monday, according to a company statement. Separately, Country Garden Services Holdings said that a unit of Fantasia didn’t repay a 700 million yuan loan that also came due on Monday and that a default was probable.
Beijing has pumped $US120 billion into its financial system in less than a fortnight while urging state-owned banks to lend more to property buyers and support the property sector but is yet to become directly involved in any attempt to rescue Evergrande.Credit:AP
Evergrande – which is at the epicentre of investor concern- has yet to publish an update since halting shares pending an announcement on a “major transaction.” The company agreed to sell a majority stake in its property services unit to a Guangdong-based developer, Cailian reported on Monday, citing unidentified people. Last week, Evergrande agreed to sell a 20 per cent stake in Shengjing Bank Co. to the local government in a deal that S&P Global Ratings said marked the first step toward solving Evergrande’s liquidity crisis.
A Bloomberg index of Chinese real estate stocks is trading at less than 0.4 times book value. That shows stock traders are applying a significant discount to the value of assets held by Chinese developers — near the largest in data going back to 2005.
Fifteen of the country’s most stressed property developers will have $US2.1 billion in bond payments due this month, according to calculations by Citigroup analysts, comprised mostly of coupons. The bill will more than double in January as principal payments come due, indicating market stress may reach another maximum around that time, the analysts wrote in a note.
