China developer stocks head for lowest levels since 2011

CHINESE property stocks headed for their lowest levels since 2011 as the ailing sector suffers from continued liquidity woes and lack of demand. 

A Bloomberg Intelligence gauge of developer shares fell as much as 2.5 per cent on Wednesday (Sep 27). The biggest drag was CIFI Holdings Group, which tumbled 55 per cent as trading resumed following a months-long suspension. The gauge is now down 37 per cent for the year, compared with the broader Hang Seng China Enterprises Index’s decline of about 10 per cent. 

The selloff has now erased all the sector’s gains since China’s reopening rally took off at the end of October 2022. Investors are bracing for further troubles among distressed builders after policy support failed to drive a sustainable recovery in home sales. While developers are counting on the Golden Week holidays to revive sales momentum, a stream of negative headlines on the sector’s distress may keep buyers away. 

Just this week, fresh drama unfolded at China Evergrande Group: Its restructuring process ground to a halt, and its billionaire chairman was put under police control. Country Garden Holdings, in the meantime, is facing another round of interest payments on Wednesday, keeping investors on edge as they brace for a potential default by the major developer. 

The crisis is threatening to push China’s economic growth to below Beijing’s target for the year. A new Bloomberg survey shows the economy is projected to expand 5 per cent – a 10 basis point-downgrade from an earlier poll – with analysts citing property as the biggest challenge for the nation. 

The property market could take as long as a year to recover, said a former central bank adviser, who is urging Beijing to do more to encourage lending to developers to halt the spread of default. BLOOMBERG