China developer Vanke shares, bonds hit new lows on debt worries
SHARES and bonds of China Vanke, the country’s second-biggest property developer by sales, hit record lows on Monday (Mar 4) on renewed concerns that the company may need more breathing room to repay creditors.
Vanke shares closed down 7.1 per cent in Hong Kong at their lowest level ever, and fell 4.7 per cent in Shenzhen, the biggest drop since December 2022. Some of Vanke’s yuan bonds also hit their lowest levels, according to Bloomberg-compiled prices, while its 3.975 per cent US dollar bond due in 2027 fell by more than six cents on the US dollar to 47.3 cents.
Vanke is one of the few large property developers in China that hasn’t defaulted and is seen as a bellwether for the government’s support of the sector. Vanke, whose largest shareholder is Shenzhen Metro Group, has faced concerns about its debt obligations as China’s home sales slump accelerated this year, even as regulators stepped up efforts to rescue the beleaguered sector.
“The weak contracted sales across the sector in February somehow spooked the worry further on Vanke’s cash flow, pressuring the bond, equity prices,” said Calvin Leung, analyst at Jefferies Hong Kong. Expectations of more government policy help remain low as a turnaround in home sales is unlikely, Leung said.
Monday’s declines across the board were fuelled by recent reports that the company is negotiating with lenders to delay payments, the latest cause of concern for its repayment abilities. In December, at least two state-backed Chinese insurers agreed to give Vanke more room on private debt payment, Bloomberg reported.
“This round of rumours has materially damaged the confidence level on Vanke in an already shaky market,” said Iris Chen, a credit desk analyst at Nomura International HK. But there should still be some sort of support against the backdrop of government policy, she added.
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Over the weekend, New China Asset Management said in a statement that it has maintained normal business ties with the developer, in response to unspecified recent reports about the two companies.
Vanke said on Friday it plans to raise about 1.16 billion yuan (S$216 million) in an infrastructure Reit that will list in Shenzhen. BLOOMBERG
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