(Bloomberg) – The onshore real estate unit of the China Evergrande group has yuan bond interest due Tuesday, in another test for the beleaguered real estate developer whose debt crisis threatens the prospects of Asia’s largest economy.
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Evergrande’s problems lead to further examination of China’s selling of global dollar bonds on Tuesday. The finance ministry said in September that it plans to raise $ 4 billion from the supply in Hong Kong, a third less than the $ 6 billion each of the past two years and the least since 2018, according to the reports. data compiled by Bloomberg.
China’s central bank has said the risks posed to the domestic economy by Evergrande can be contained. The problems of the real estate company “cause a little concern,” said the governor of the People’s Bank of China, Yi Gang, at a virtual meeting of the Group of 30 on Sunday.
Tighter restrictions on the real estate market have dampened construction activity and restricted funding to the sector, weighing on growth. Home sales by value fell 16.9% in September from a year earlier, following a 19.7% drop in August, according to Bloomberg calculations based on National Bureau of Statistics data released on Monday. . Property stocks on the mainland fell on the report.
Fears of contagion risks intensified after a surprise default by Fantasia Holdings Group Co. and a warning from Sinic Holdings Group Co. that its default was imminent. Chinese yields are expected to decline over the next two years due to slower growth and the anticipated easing of the PBOC, according to Oliver Allen of Capital Economics.
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The Evergrande unit is expected to pay interest on the yuan bonds due on Tuesday.
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Chinese Dollar Junk Bonds Rise Despite Downgrades (11:06 HK)
Chinese high yield dollar bonds were still climbing 1 to 2 cents against the dollar on Tuesday morning, credit traders said. The gains came even after real estate companies, which dominate this lower-rated sector, were hit by a series of downgrades.
Kaisa Group, Guangzhou R&F Properties, Golden Wheel Tiandi and Yango Group saw their ratings drop on Monday.
Chinese real estate sector shrinks for first time since pandemic (10:59 a.m. HK)
China’s real estate and construction industries contracted in the third quarter for the first time since the start of the pandemic, weighed down by a real estate slump.
Production in the real estate industry, a mainstay of the economy as its activities support sectors ranging from furniture to raw materials, fell 1.6% from a year ago, according to an additional report on the gross domestic product released Tuesday by the National Bureau of Statistics. This is the first contraction since the first quarter of 2020.
Evergrande Suspends Discussions with Hopson: REDD (9:28 a.m. HK)
Evergrande’s negotiations to sell its 51% stake in its property management unit Evergrande Property Services Group to Hopson Development Holdings have been suspended, according to REDD, citing two sources with information on the matter.
The developers did not get support from the Guangdong government, REDD said, citing a third source. Evergrande and Hopson did not immediately respond to requests for comment. Appeals to the Guangdong government press office went unanswered.
China Starts Sale of Four-Piece Dollar Bonds (9:11 a.m. HK)
China markets a sale of dollar bonds in Hong Kong for the fifth year in a row, as signs of strain appear in the country’s credit market amid growing concerns over the financial health of its developers.
The Finance Ministry announced on September 30 that it would sell a total of $ 4 billion in dollar bonds under a four-tranche deal, less than the sale of $ 6 billion for the year last.
HK residential project sold to partner: HKET (8:00 a.m. HK)
China Evergrande has successfully sold its stake in a residential project in Hong Kong to its partner VMS Group, the Hong Kong Economic Times reported, citing discussions in the market.
The Vertex residential project in Cheung Sha Wan still has around 190 units after the sale of 224 apartments. HKET estimates that the stake sold by Evergrande, including the 30,000 square foot mall and 30 parking spaces, has a market value of HK $ 2.4 billion ($ 309 million).
China Yields May Fall in 2022 Due to Slower Growth (2:10 p.m. NY)
While Chinese yields have recently increased, they are expected to decline over the next two years due to slower growth and the expected easing of the People’s Bank, according to Oliver Allen of Capital Economics.
“We expect the yield on 10-year government bonds in China to rise from just over 3% currently to 2.5% by the end of next year,” Allen wrote in a note to search monday.
While Capital Economics does not expect “widespread contagion to the Chinese financial system from the events surrounding Evergrande, we believe its economy will remain very weak as construction activity slows significantly and a shift in consumption patterns. global pressures are weighing on demand for its exports, ”Allen wrote.
Moody’s Cuts Guangzhou R&F, Kaisa, Greenland (5:37 p.m. HK)
Moody’s Investors Service downgraded the Guangzhou R&F Properties Co. family of companies to B3 from B2. It also downgraded R&F Properties HK Company’s rating to Caa1 from B3.
Guangzhou R&F’s decision reflected the company’s low liquidity and high refinancing risks based on debt maturing in the next 6 to 12 months and its limited access to offshore financing, Moody’s said.
Previously, the rating company downgraded the rating of the Kaisa Group Holdings Ltd. family of companies. to B2 from B1 with the expectation that the liquidity of the company will weaken and as the refinancing risks increase. Separately, he reduced Greenland Holding Group Co. to Ba2 from Ba1 and placed the family of companies rating of China Aoyuan Group Ltd. under revision for downward revision.
Interest terms for Evergrande dollar bonds:
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