SHANGHAI, Sept 28 (Reuters) – Investors dumped shares and bonds of Chinese property developers on Wednesday after a news report that CIFI Holdings (Group) Co had defaulted, adding to concerns over the sector crisis. immovable.
Hong Kong-listed shares of CIFI Holdings (0884.HK) plunged 32.3% to a record low at market close on Wednesday, after credit information provider Reorg said the Chinese developer had defaulted. the payment of certain non-standard debts.
In response to questions about the report, CIFI said it was actively seeking solutions, without giving further details. The company’s website said it was the eighth listed developer in China last year.
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The fall in stocks, which came after the chairman of CIFI recently predicted “unprecedented” liquidity stress to come, sparked wild selling in the sector.
Stocks and bonds of other property developers also tumbled.
A tracking index of mainland developers listed in Hong Kong (.HSMPI) fell more than 6.4% to record highs.
In Shanghai, bonds issued by real estate companies such as CIFI Holdings, Sunac Real Estate and Gemdale Corp were among the biggest losers. The Shanghai Stock Exchange briefly suspended trading in a CIFI bond, citing abnormal fluctuations.
Investors fear the sector’s cash crunch may finally hit CIFI, which was seen as one of the few relatively resilient private developers in the country, said Shujin Chen, head of China FIG Research at Jefferies.
“The general fragile investment sentiment following the fall in sterling and global monetary policy uncertainties certainly did not help,” she added.
The steep stock market losses this week also show that investors do not expect any new real estate stimulus to be announced during or immediately after the 20th Communist Party Congress to be held from October 16.
CIFI Holdings defaulted on its debt payment under a project company known as Tianjin Xingzhou Real Estate Development Co, Reorg reported, citing sources.
In a letter to employees dated Sept. 27, CIFI Chairman Lin Zhong said the company’s priority now is to survive as property sales in China remain slow amid COVID-19 lockdowns, d an economic slowdown and a boycott of mortgage payments.
“The difficulties and hardships will persist for quite a long time,” Lin said in the letter, which was widely circulated via social media and confirmed by the company.
Lin said the mortgage boycotts prompted many local authorities to tighten cash withdrawals from escrow accounts, further reducing liquidity for property developers.
“Although we have more than 30 billion yuan ($4.14 billion) of cash on the books, the overwhelming majority of this cash has been unable to meet reasonable business demand,” the letter said. CIFI.
“In the months ahead, CIFI’s cash flow will face unprecedented challenges.”
A source in direct contact with Lin told Reuters that Lin was under immense pressure as there is no new and significant political support in sight, so “it’s unclear when the industry will be able to see a glimmer of light.” ‘hope”.
Last week, CIFI was downgraded by Fitch Ratings, which cited the developer’s lower liquidity buffer and higher leverage.
China’s property market woes deepened in August, with official data showing house prices, sales and investment all plummeting, adding pressure to the sluggish economy. A number of leading developers have defaulted on bonds, and local governments are scrambling to find financing solutions that will allow the stalled construction of new homes to resume. Read more
($1 = 7.2501 Chinese yuan renminbi)
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Reporting by Shanghai Newsroom and Xie Yu; Editing by Kim Coghill
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