Business & Investment

Chinese authorities are trying to reassure the real estate debt crisis, some bonds rebound

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Hong Kong / Shanghai — Risks are controllable, banks’ excessive credit crunch has been rectified, and more Chinese officials are afflicting the country’s real estate sector on Wednesday with investors and homeowners I tried to reassure the person.

The cash crisis of China’s Evergrande Group, the world’s most debt-rich developer, could disrupt the global market in recent weeks and hurt high-yield bonds issued by other Chinese real estate developers. Concerns.

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According to the Xinhua News Agency, Deputy Prime Minister Liu He told Beijing’s Financial Street Forum that the overall risk of the real estate market is controllable and the real estate market is on track for sound development.

Meanwhile, China’s securities regulator Chairman Yi Kai Mitsuru added in the same forum that authorities would curb excessive funding and the country would properly handle bond market default risk.

“(What is needed) is to improve the effectiveness of the constraint mechanism on debt lending and avoid over-leverage due to’high leverage’,” said Yi.

According to Nomura, China’s real estate developers have a debt balance of 33.5 trillion yuan ($ 5.24 trillion), which is about one-third of their gross domestic product (GDP).

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Pan Gong-Shen, head of foreign exchange regulators in China, has gradually corrected excessive tightening by markets in the financial institutions and the real estate sector, and financial activity is normalizing, financial magazine Ikai reported. ..

These comments followed a speech by the President of the People’s Bank of China (PBOC), Yi Gang, on Sunday at https://www.reuters.com/world/china/china-faces-challenges-mismanagement-certain-firms-says- pboc -head-2021-10-17 The world’s second-largest economy is “going well,” but faces challenges such as the risk of default for certain companies due to mismanagement.

According to a record released Wednesday by the People’s Bank of China, China fully respects and protects the legal rights of Evergrande Group creditors and asset owners in line with legal repayment priorities. ..

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Lee also said regulators should do their best to avoid the risk that Evergrande will spread to other real estate developers and the broader financial sector.

Evergrande is struggling to raise money to pay many lenders and suppliers in the hope that one of its international bonds will formally default. The company has shelved plans to sell a majority stake in the real estate services sector, sources said.

I paid an onshore coupon that expired on Tuesday, but the dollar bond that expired on March 23, 2022 will benefit the company after a 30-day grace period for the coupon payment that expires on September 23. If you do not raise, it will officially become the default. ..

Official reassurance and coupon payments from other major developers have helped support the wider offshore bond market these days.

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China’s high-yield bond index, which is dominated by real estate developers, confirmed that spreads continued to narrow on Tuesday evening US time after reaching record levels last week.

However, the continued slump in bonds issued by Kaisa Group, which was downgraded on Tuesday, shows that investor concerns are protracted. Kaisa’s January 2023 11.5% bond led the loss, dropping nearly 14% to about 37 cents.

“The market is still looking for the bottom and I feel sensitive,” said the portfolio manager, who asked not to be identified because he was not allowed to talk to the media.

During the surge in the real estate market between 2016 and 2018, tens of thousands of Chinese developers were in heavy debt to build their homes.

New construction has been sluggish for six consecutive months in September, and home prices have fallen in some countries.

“As economic activity weakens, there will be more pressure to ease the funding burden on debtor borrowers,” Capital Economics said in a Wednesday survey note. We anticipate that the cut will begin. renminbi) (Reported by Clare Jim and Meg Shen in Hong Kong, Andrew Galbraith in Shanghai, edited by Louise Heavens and Kim Coghill)

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Chinese authorities are trying to reassure the real estate debt crisis, some bonds rebound

https://financialpost.com/pmn/business-pmn/chinese-officials-seek-to-reassure-on-property-debt-crisis-some-bonds-rebound Chinese authorities are trying to reassure the real estate debt crisis, some bonds rebound

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