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The Hang Seng Mainland Properties Index lost 6.4% on Monday to trade at an eight-month low amid renewed investor concerns over China’s beleaguered real estate sector.
The latest slide came despite news over the weekend that Dalian Wanda , the heavily-indebted conglomerate with significant real estate exposure, had managed to make a $400 million bond repayment that was due Sunday after raising $320 million through the partial sale of a subsidiary.
The last-ditch nature of the deal and repayment rattled investors already on edge following the default of property giant Evergrande and others in the sector in late 2021.
And a downgrade of Country Garden
2007,
China’s biggest homebuilder, from neutral to underweight by property analysts at JPMorgan, added to the angst. The U.S. bank said sales have weakened across the sector since the second quarter of 2023 and “liquidity concerns…have been reignited.”
Related: China’s property woes offer a window into the demise of the country’s boom times
“We noted an almost across-the-board slump in Country Garden’s bond prices on [Friday], particularly among onshore bonds,” said the JPMorgan note. Bond prices of other privately owned enterprises including Longfor
960,
and Seazen also have turned weaker, but County Garden’s particularly underperformed, the analysts said.
Source: JPMorgan
China’s real estate groups have struggled after taking on too much debt at the height of a property bubble, the deflating of which has ben exacerbated by China’s faltering recovery from the COVID pandemic.
“A weak showing from Hong Kong’s Hang Seng
HSI,
cast a dark cloud over the start of the new trading week, with the index falling 2.3% as investors dumped holdings in real estate, consumer cyclicals and basic materials companies,” says Danni Hewson, head of financial analysis at AJ Bell.
“China’s post-Covid economic reopening is proving to be less robust than hoped at the start of the year, and now it seems that investors are growing tired of waiting for the Chinese government to announce new stimulus measures,” she added.
Attempts to revive the sector, such as last week’s announcement to improve living conditions in so-called shanty areas of the 21 largest cities, may not provide the necessary stimulus, analysts warned.
“[T]he scale seems to be much smaller than the last round of shantytown redevelopment which was nationwide and aimed at redevelopment not just improvement,” said strategists at Saxo Bank.
“Also notably, the last round of shantytown redevelopment was financed by money printing by the People’s Bank of China through policy banks, such as China Development Bank, in the form of pledged supplementary lending. This time, the directive last Friday called for financing from multiple sources including local governments and the private sector, Saxo added.
However, news later emerged Monday that the Communist Party’s Politburo — China’s top decision making body — said it would ease property policies and look to expand domestic demand in order to revive growth, according to Bloomberg.
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