Yuan-denominated bonds issued by Chinese promoters CIFI Group, Shanghai Shimao Co, Guangzhou Times Holdings and Country Garden they shot up between 20% and 40% each on Tuesday.
The move will make it easier for developers to secure new financing, analysts say, but reviving demand from homebuyers will remain a challenge amid the persistent restrictions due to COVID-19which triggered a rare wave of street protests in many Chinese cities.
This measure is the latest regulatory relaxation at a time when Beijing is intensifying its support for the real estate business, a sector that represents a quarter of the Chinese economy. Many developers have defaulted on their debt obligations and halted construction.
Hubei Fuxing Science and Technology Co said late on Tuesday that it plans to launch a private placement of shares to finance real estate development, becoming the first listed firm in China to announce such a move after the ban was lifted.
The company will target 35 investors in the sale of shares, which will not exceed 30% of the current capital base, he said in a stock market filing. That size is worth 1.37 billion yuan ($191 million) based on its current market value.
China’s CSI 300 real estate index closed up 9.4%, its biggest daily jump. For its part, Hong Kong’s Hang Seng Mainland Properties Index rose 8.1%. Shares of Longfor, Agile and China Vanke jumped between 8% and 14%, while Country Garden added 4.5%.
Nomura analysts said they believed sentiment towards the property development sector “should see a notable increase due to the continued introduction of easing policies by the central government in the past month.”
However, they added that after the latest change, the supply-side easing policy has “more or less exhausted itself” and that the central government will have to find ways to boost real estate demand.
Reviving real estate demand will be a challenge given “the recent worsening of the COVID-19 situation and protests in major Chinese cities, as well as the weakening trend in house prices,” Nomura analysts wrote.
Street protests broke out in cities across China over the weekend, what analysts described as a vote against President Xi Jinping’s COVID-19 policy and the country’s biggest show of public defiance during his political career.
Despite uncertain demand prospects, investors applauded the latest financing support measures.
Shares of Chinese investment banks also rose on hopes that the latest easing in equity financing could potentially boost their equity underwriting business.. Citic Securities rose 3.4% in Hong Kong.
On Wall Street, Chinese stocks, meanwhile, jumped nearly 18%. The papers of GDS Holdings (+17.5%), HUDI International (+14.9%) and Kanzhum Limited (+12.9%) stood out. Then follow the papers of Baidu (+6%), Alibaba (+5.1%) and Nio (+4.3%).
Source: Ambito
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