China property stocks surge after Beijing picks 50 firms to fund

CHINESE developers’ bonds gained along with their shares after Beijing began drafting a list of 50 real estate firms that would be eligible for financing, in the latest move by the authorities to support the embattled property sector.

A Bloomberg gauge of China developer stocks gained as much as 7.6 per cent in early trading to head for its biggest advance since September. Sunac China Holdings led the sector’s rise, rallying by as much as 27 per cent, while Seazen Group and Agile Group Holdings jumped more than 10 per cent each. 

The so-called “white list” may alleviate fears of further contagion in China’s property sector, where even state-backed builders have not been immune from funding troubles. Still, it remains to be seen if the move will halt the industry’s long-running slump, given that it does not represent a directive to banks to extend loans to real estate firms. 

While the measure may help to boost confidence, the event is unlikely to mark the end of developer defaults, said JPMorgan Chase analyst Karl Chan. 

“Directionally, this would be positive, as it should enhance confidence from both homebuyers and banks,” he wrote in a note. “But if property sales of a non-state-owned enterprise deteriorate substantially, we believe most banks may still be reluctant to extend support, as a white list may likely only serve as a ‘reference’.”

China Vanke, Seazen and Longfor were among the companies that were named in a draft of the funding list, sources said, asking not to be named because the information is private. 

The list, which includes both private and state-owned developers, is intended to guide financial institutions as they weigh support for the industry via bank loans, debt and equity financing, the sources said. It could not be determined which other developers were included on the list.

China Vanke led gains in developers’ bonds after its 3.5 per cent notes due 2029 rose 2.3 cents to 60.7 cents on the dollar on Tuesday (Nov 21) morning. Longfor and Seazen’s notes also advanced, although the bonds still trade at distressed levels.

China’s biggest banks, brokerages and distressed asset managers were told to meet all “reasonable” funding needs from property firms at a Friday gathering with the top financial regulators, said a government statement that did not mention a white list. Financial firms were also asked to “treat private and state-owned developers the same” when it comes to lending.

SEE ALSO

Sunac China says restructuring conditions satisfied

China wants to bulldoze old neighbourhoods to revive economy

China puts money behind Singapore model in major housing shift

Still, some investors remain doubtful that the measures can reverse the sector’s slide.

“We want to see which private developers are actually on the list, as well as the size of the funding eventually delivered, because in reality, banks that have low risk appetite might not provide that much support,” said Andrew Zhu, fund manager at at Hainan Shire Asset Management. BLOOMBERG