Chinese Real Estate Shares Rise Thanks to Beijing Stimulus, Despite Continuing Debt Crisis | China

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Chinese Real Estate Shares Rise Thanks to Beijing Stimulus, Despite Continuing Debt Crisis | China

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Chinese real estate stocks skyrocketed for a second day thanks to Beijing’s leadership decision to lay a lifeline in the country’s troubled real estate sector amid mounting pressures at home and abroad.

Despite a downgrade for China’s third-largest real estate developer Sunac on Thursday, shares in the sector rose again in Hong Kong and the mainland thanks to the announcement by Vice Premier Liu He, the czar of the Chinese economy, on Wednesday that the government was to cut. the risks in the industry.

As a sign of the growing concern within the Chinese Communist Party leadership about the real estate sector and the economy in general – best illustrated by the near collapse of the giant developer Evergrande – Liu urged the adoption of pro-market policies in support of the economy.

This pushed the Hang Seng mainland properties index up 14.8% by noon in Hong Kong on Thursday, versus a 5.8% rise in the main Hang Seng index. The sub-index had already jumped 14.7% on Wednesday.

Tech stocks also rebounded after being under pressure for months. The Hang Seng tech tracker was up more than 7% after a whopping 22% increase on Wednesday, although it still halved that value from last year’s highs.

However, some investors worry that the real estate rally is unsustainable as it stands against the backdrop of continuing problems for major Chinese developers.

On Thursday, Sunac China, the nation’s third-largest property developer by sales, was downgraded to a B-credit rating by the S&P agency – making it more difficult to borrow money – on fears it may not be able to cope with its enormous debt repayments of nearly $ 4 billion due this year.

S&P analysts have downgraded Sunac China’s liquidity position from “less than adequate” to “weak” and warned that the ratings will be revised as soon as “we have more visibility on Sunac’s refinancing plans”.

They wrote: “Sunac China Holdings Ltd is facing a concentrated debt repayment over the next six to 12 months, resulting in significant refinancing risk and weak liquidity. Capital market confidence is weakening rapidly. “

Despite this grim assessment, Sunac’s shares rose 60% in Hong Kong on Thursday afternoon. Other major developers, Country Garden and Evergrande, were both more than 20% positive.

The real estate sector, a key driver of growth, has struggled for months as Beijing’s campaign to reduce high levels of debt triggered a liquidity crisis among some major developers, leading to bond defaults and shelved projects.

Following Liu’s comment, the banking and insurance regulator also said Wednesday that it will seek to stabilize land and home prices, transform the real estate sector, and encourage mergers and acquisition loans for developers to purchase troubled assets.
The finance ministry later said China would suspend a planned property tax trial this year, state-run Xinhua news agency reported.

Bill Bishop, the Chinese observer and author of Sinocism’s newsletter, said on Thursday that Liu’s move to try to bolster the markets showed how concerned Beijing was.

“The reading shows how concerned politicians are about the markets, the real estate sector and the economy, but I would be wary of assuming that the message from Liu He and other financial regulators means that the difficult days are over,” he wrote.

“They are certainly trying to send a signal that they don’t want the markets to drop any further, but it’s not clear if this is a real shift or more of a calibration to stabilize things.”

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