China Vanke stock, bonds resume their sell-off on liquidity concern, ET RealEstate

March 4, 2024

HONG KONG: Investors sold China Vanke stock and bonds on Monday, picking up from where they left off last week as concern over liquidity at the nation’s No.2 property developer by sales trumped fundraising plans and assurance from a business partner.

China Vanke’s Hong Kong-listed shares fell 7.1%, having finished last week down 8.1%. The developer’s Shenzhen-listed shares lost 4.7%, exacerbating last week’s 3% decline.

China Vanke’s 2029 dollar bonds were bid at 40.282 cents on the dollar as of 1127 GMT, more than 5 cents lower than on Friday, data from Duration Finance showed.

The state-backed property developer’s onshore bond due 2028 was temporarily suspended from trading after plunging by more than 20% to 64 yuan in the afternoon, while a 2027 bond reversed gains to ease 3.6%. Its other yuan bonds generally stabilised, however, with small gains of over 1%.

China has struggled to contain the debt crisis that has gripped the sector since mid-2021 and seen property giants including China Evergrande Group and Country Garden default on billions of dollars in debt.

Shenzhen-based Vanke, another well-known household name with many high quality projects across major cities, had been seen by the market as a financially sound developer, especially with backing from its largest shareholder, state-owned Shenzhen Metro.

Any repayment trouble at Vanke, one of few remaining Chinese developers with investment grade credit ratings, could further hamper market confidence, analysts said.

At least two Beijing-based insurers that farmed out annuity investments late last week told their external portfolio managers to closely monitor Vanke’s credit risks, Bloomberg News reported on Monday, adding one life insurer also told its pension managers to curb exposure.

Market concern first resurfaced after credit data provider Reorg last Monday said Vanke was in discussion with insurers to extend debt maturities, and that management had visited Beijing to seek government assistance.

Local media subsequently reported that New China Asset, a unit of New China Life Insurance, had rejected proposals to extend maturities on China Vanke debt it held.

On Sunday, New China Asset said it has been maintaining normal business cooperation with China Vanke, and that reports about the pair are “untrue”.

China Vanke on Monday declined to comment when contacted by Reuters.

On Friday, China Vanke said it planned to raise about 1.2 billion yuan ($166.70 million) by spinning off three warehouse logistic parks owned by a unit and listing them in Shenzhen through an infrastructure real estate investment trust.

Vanke experienced similar sell-offs in late October. At that time Shenzhen Metro, together with its holding body, Shenzhen state asset regulator (SASAC), reacted quickly to show their liquidity support for Vanke to ease market concerns.

JPMorgan said in a note on Monday it could take more time to address the closely watched overhangs such as shareholder support for Vanke. It added the operating environment for developers remains challenging and it would take more for policymakers to address the sector’s liquidity crunch.

Moody’s downgraded Vanke’s issuer rating in November by two notches to Baa3, just above “junk bond” ratings, citing weakening contracted sales and uncertainty over timely access to long-term unsecured funding.

It noted the developer had sizable refinancing needs with around 10 billion yuan ($1.39 billion) of offshore bonds and 9.3 billion yuan of onshore bonds due or becoming putable in 2024.

  • Published On Mar 4, 2024 at 06:57 PM IST

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