By Bingyan Wang
Shares of Chinese property developers rose sharply Monday, as more major Chinese cities said over the weekend that they would ease mortgage policies in a bid to shore up the real-estate sector.
The Hang Seng Mainland Properties Index rose 8.2%. Hong Kong-listed Longfor Group Holdings climbed 10% and Seazen Group jumped 17%. Shanghai-Listed Gemdale added 4.1% and China Vanke gained 1.4%.
Major Chinese cities across the country, including Beijing and Shanghai, lowered mortgage requirements for some home buyers late last week, lowering the bar for home purchases.
“This nationwide policy measure marks a significant step in stimulating the property sector, as top policymakers become increasingly worried about the collapse of the property sector, the downward spiral, and a rising number of credit risk events among major developers and financial institutions since mid-August,” Nomura analysts said in a note.
Separately, news reports over the weekend saying that property giant Country Garden Holdings received creditor approval to extend a bond also lifted the mood and supported the company’s shares. Country Garden shares were last up 9.0% at 0.97 Hong Kong dollars (12 U.S. cents).
Year to date, Country Garden’s stock has slumped 64% after the company posted its worst loss since going public 16 years ago and missed $22.5 million in interest payments on its dollar bonds in August.
Despite Chinese authorities’ supportive policies and Country Garden’s bond extension, some analysts warned that the extension could just be a near-term reprieve.
“With the lack of an eventual resolution [for Country Garden],” headwinds linger for the Chinese property sector, IG Asia analysts said in a note.
“Persistent earnings weakness will no doubt drive the sector’s leverage higher,” said S&P Global Ratings credit ratings analyst Oscar Chung.
S&P believes industry leaders and real-estate companies with a diverse business mix such as rental and service incomes can better withstand declining development margins.
Write to Bingyan Wang at [email protected]
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