The Evergrande debt crisis is at the center of the turmoil in the Chinese real estate market.
(Photo: dpa)
Frankfurt The shares of Chinese real estate developers broke out of their downward spiral on Tuesday. The CSI 300 Real Estate Index for real estate securities rose 4.5 percent, its highest level in two months. The index has caught up around 20 percent since its low in November.
China’s real estate industry has been in a crisis for months, the immediate trigger being the turbulence surrounding the project developer Evergrande. The company, which is more than 300 billion dollars in debt, can no longer service part of its bonds.
In the meantime, after months of hanging out with Fitch and Standard & Poor’s, two rating agencies have officially determined Evergrande’s insolvency. With Kaisa, a second real estate company that is nowhere near as highly indebted is also officially insolvent.
For the recovery of real estate stocks on Tuesday, analysts blame the growing hope for more government support for the ailing sector. According to a report in the “China Security Journal”, the government in Beijing is urging economically sound and state-owned real estate developers to take over projects from weaker companies. The aim is to prevent the Evergrande crisis from spreading to the entire sector or even the entire financial sector.
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In order to achieve this goal, the regulators had signaled to the banks that they should provide enough credit for such emergency takeovers. The central government would also like the banks to invest in bonds that healthy companies would issue to finance acquisitions. Beijing would only support the acquisition of specific real estate projects, not the purchase of shares in the ailing developers.
Many bonds not serviced on time
On the Shanghai Stock Exchange, the shares of Poly Developments gained more than four percent and rose to their highest level since March. China Vanke and Greenland Holdings also rose over four percent. The biggest winners were Fantasia Holdings, which rose over 21 percent after some bondholders agreed to postpone payments.
In Hong Kong, the shares of Sunac China Holding gained nearly ten percent after the price had posted record losses at the beginning of the week and had fallen by 18 percent.
This year, according to calculations by the Bloomberg news agency, more international bonds from Chinese companies have defaulted than ever before. Overall, issuers from the People’s Republic were unable to service bonds with a value of $ 13.3 billion on time. Half of this was in the real estate sector.
More: China scrutinizes Evergrande founder’s fortunes