Monday, January 24

Signs of relief; Overdue Bonus Paid Coupons: Evergrande Update

Speculation that China will take steps to ease the cash shortage of conflicting developers helped propel stocks and real estate bonds for a second day.

Bank lending to real estate companies rose sharply in October and the momentum is expected to extend into November, the country’s leading financial newspapers reported, adding to signs that credit conditions may improve for the industry. China Evergrande Group appeared to pay interest on the dollar bonds at the last minute, avoiding default. Clients of international clearing firm Clearstream received past-due interest payments on three US dollar bonds issued by Evergrande, a Clearstream spokesperson said.

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One gauge of real estate stocks rose 5.4%, heading for its best two-day gain since 2015, with short sellers undoing their bearish bets. Chinese high-yield dollar bonds rose between 2 and 8 cents on the dollar. Developer stocks and bonds rose on Wednesday amid speculation that China will allow state-owned real estate companies to acquire distressed rivals without violating leverage metrics. Local news agency Cailian later reported that state-owned companies made such a request to regulators.

Key developments:

  • China’s state media fuels speculation Property crackdown may alleviate
  • Northeast Chinese city to ease restrictions on home buying: Cailian
  • Kaisa Group downgraded to CCC- by S&P
  • Fallout from China’s real estate bonds has traders in the crosshairs of Beijing’s response
  • The darkest times may be over for real estate: China today
  • Agile Group downgraded to BB- by S&P, Negative Outlook
  • Credit Suisse, UBS Curb Margin Funding for China Real Estate Bonds
  • How Wealth Products Helped Inflate Real Estate In China: QuickTake
  • People’s Bank of China: China’s outstanding mortgage loan growth accelerates

State Media Raise Hopes to Ease Curbs (11:24 a.m. HK)

China’s bank lending to real estate developers rose sharply in October and the momentum is expected to extend into November, the country’s major securities newspapers reported.

The China Securities Journal, Shanghai Securities News and the Securities Times published similar reports on their front pages Thursday, compiling the October credit data released by the People’s Bank of China on Wednesday afternoon. Mortgages also rebounded in the month, the central bank said in a separate report.

Chinese developer Kaisa faces proof of payment (9:36 a.m. HK)

Kaisa Group Holdings Ltd. faces two interest payments on dollar bonds this week totaling $ 88.4 million, days after the Chinese developer defaulted on payments on financial products it guaranteed. This week’s interest payments have 30-day grace periods before events of default occur, according to the bond documents seen by Bloomberg.

Property Cuts Squeezed at Full Stake (8:41 a.m. HK)

Betting against Chinese developers is suddenly becoming a more dangerous game, as expectations of easing measures squeeze short sellers who went to great lengths to target stocks this year.

A gauge of stocks in the country’s real estate companies rose 6.2% on Wednesday. Short sales volume exceeded 20% of the total share turnover of 13 of the 28 Hong Kong-listed companies in the index (mainland China shares are not eligible for short sales). For Sunac China, whose shares were up 15%, the most in seven years, short selling volume was the third highest on record as bears were forced to undo their positions.

Traders Watch Beijing’s Response to Bond Fallout (5 a.m. HK)

First it was China Evergrande Group. Then it was the smaller developers classified as junk. Now, most of China’s largest real estate firms are getting hit in the bond market, adding to pressure on Beijing to limit the damage.

Higher-rated companies such as Country Garden Holdings Co. and China Vanke Co. have seen their dollar bonds fall in recent days amid concerns over the size of the industry’s hidden debt and the ability of companies to refinance. .

The growing consequences may prompt policy makers to take steps to ease the liquidity crisis. On Wednesday, a local media report said officials may loosen restrictions on domestic bond issuance to prevent financing conditions from worsening. The news sparked gains on real estate company bonds, although analysts warned that such a development would only benefit higher-quality companies. Cailian also reported that state-owned companies have asked regulators to tighten the “three red lines” lending limits for mergers in the sector, helping to boost developer stocks.

Evergrande pays interest, set to avoid default again (4:06 a.m. HK)

Clearstream clients received past-due interest payments on three U.S. dollar bonds issued by Evergrande, a Clearstream spokesperson said, while two investors who own two of the bonds confirmed they received the payments and asked not to be identified because they were not authorized to trade. talk. in public.

Evergrande missed initial interest deadlines last month, data compiled by Bloomberg shows. The affected bonds include a 9.5% note due 2022, 10% notes due 2023 and its 10.5% note due 2024. The real estate giant pulled back from the brink of default in October by paying other coupons before the end of your grace period.

A look at Evergrande’s maturity schedule:

Dollar bonds Coupon expiration date Grace period ends Amount

(A million dollars)

TIANHL 13% due in 2022 November 6th 6th of December 41.93
TIANHL 13.75% due in 2023 November 6th 6th of December 40.56
EVERRE 7.5% due in 2023 December 28th January 27th 50.43
EVERRE 8.75% due in 2025 December 28th January 27th 204.77

© 2021 Bloomberg

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