China’s housing woes push Vanke, Longfor deeper into distress
Other developers also saw deep slumps
SOME of China’s most closely watched property developers slid by the most in months, after home sales data underscored a worsening real estate slump.
China Vanke’s 3.5 per cent dollar bond due 2029 was down about 5 US cents on the dollar on Tuesday at 42.4 US cents, the steepest daily decline since March 4.
Other developers also saw deep slumps. A 3.95 per cent dollar bond due 2029 issued by Longfor Group Holding fell by around 2 US cents to 65.1 US cents, and is poised to touch its lowest price since May, according to Bloomberg compiled data.
Chinese builders are facing relentless pressure from continued declines in property sales and growing worries about their liquidity. Vanke’s contracted sales slid 24 per cent in August from a year earlier, worsening from a 13 per cent drop in July. The sagging sales data followed the company’s first half-year loss in more than two decades.
A Bloomberg index tracking Chinese real estate stocks fell by as much as 5.3 per cent on Tuesday morning, the biggest intraday decline since May, after some property companies were removed from the China-HK stock connect. Shares of CIFI Holdings Group fell as much as 29 per cent, while Vanke was down as much as 3.1 per cent in Hong Kong.
“Investors are selling because of the weak property sales data and there’s no sign of stabilisation in sight,” said Ting Meng, senior Asia credit strategist at Australia & New Zealand Banking Group. “It still needs a while for the industry to recover,” she added.
Earlier this month, S&P Ratings downgraded China Vanke’s long-term rating to BB- from BB+, citing reasons including poor sales and weakened liquidity. The ratings firm expects Vanke’s contracted sales to decline by 35 per cent in 2024 and 18 per cent in 2025.
Despite Chinese regulators’ efforts to jump start the real estate sector, the residential slump continues to deepen. In August, the value of new-home sales from the 100 biggest real estate companies fell about 26.8 per cent from a year earlier to US$35.4 billion, according to preliminary data from China Real Estate Information. That compares with a 19.7 per cent decline in July.
“The market has been looking for more decisive policy support towards the property sector, unfortunately this has not been forthcoming,” said Clement Chong, head of fixed income research at Eastspring Investments. “Investors’ confidence around a sustained recovery in the property sector is not very high at the moment,” he added. BLOOMBERG
Share with us your feedback on BT's products and services
