Home News Chinese property stocks rally on $44bn bailout hopes

Chinese property stocks rally on $44bn bailout hopes

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China’s largest real estate developer’s stake has rebounded after reports that the government has created a dedicated fund to support a heavily in debt sector.

Financial news agency REDD reported on Monday that the State Council of China passed a plan last week to set up a real estate fund worth up to RMB 300 billion ($ 44.4 billion) to support at least twelve. property group.

The news boosted the Hansen Mainland Real Estate Index, which tracks the 10 largest Hong Kong-listed real estate companies in the country, by as much as 5.4% in early transactions. The two components, Country Garden and Long Four Group, rose 8.3% and 9%, respectively.

Trading of some of the index’s largest components, such as China Evergrande Group, Shimao and Snacks, has been suspended in recent months due to the group’s liquidity crisis.

China Construction Bank and China’s central bank will inject RMB 80 billion into a new fund to help poor real estate companies complete deadlocked development projects, according to one person who was briefed on the initiative.

The fund, which supports at least 12 real estate groups, was approved by regulators last week and could be expanded to RMB 300 billion. In addition to reviving stagnant projects, the money could be used to buy developer bonds, issue loans, and acquire shares, he added.

If construction gets stuck, development begins shortly after real estate buyers across the country threaten to stop paying mortgages for unfinished apartments. Boycott-affected banks later stated that their overall exposure to potential payment boycotts was minimal, but the threat warned local governments and national regulators.

The liquidity crisis that spills over China’s entire real estate sector, which accounts for about 30% of the world’s second-largest economy’s total output, began last year when Shenzhen-based Evergrande defaulted. ..On Friday, Evergrande’s CEO and Chief Financial Officer I was forced to resign For their liability in issuing third-party guarantees that have frozen over $ 2 billion in cash at Group subsidiaries.

The predicament and frequent blockades of the sector aimed at eradicating the outbreak of Covid-19 almost stopped the Chinese economy, dropping year-over-year growth in the second quarter to just 0.4%.

Forced local governments across the country Take responsibility We asked state banks and asset managers to help complete financing of the stagnation of development by Evergrande and other real estate companies in its jurisdiction.

However, reactions are generally modest, as potential white knights are afraid that most projects will not be profitable, according to local government officials and finance executives involved in the bailout debate. It has become.

Chen Long of Plenum, a Beijing-based consultancy, said it would be impossible to recover a completely sold project. “You have to pay the construction company to complete them, but there is no profit,” he said. “You are basically throwing away money.”

Chen added: “Is the local government ready to cancel the completion cost? That’s a difficult decision.”

New funds led by CCB and the People’s Bank of China are also seeking “moderate” returns on their investments.

Last week, a local government support group in Zhengzhou, the capital of central Henan, announced Similar fund It aims to help developers who are underfunded in the region.

Additional report by Tom Mitchell of Singapore

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