China Evergrande Group and other real estate developers from China are struggling to deal with high debt levels. The state of the country’s property market is far from being ideal. Investors are monitoring China Evergrande Group’s problems. The country’s one of the major real estate developers is trying to avoid the worst-case scenario.
China Evergrande Group is not alone as other major developers also reported liquidity problems in the last several days. Chinese property stocks in Hong Kong mostly declined last week. China Evergrande Group was among the least affected and lost about 1.3% for the week.
Only five of the country’s largest twenty real estate developers by assets as of the first half of 2021 were central state-owned enterprises. China Evergrande Group, Kaisa Group Holdings, and Shimao Group Holdings do not fall in that state-owned company.
China’s property market and risk factors
China’s property market is unstable at the moment. China Evergrande Group is the industry’s biggest issuer of U.S. dollar-denomination high yield bonds. Apart from China Evergrande, Kaisa Group Holdings as well as Shimao Group Holdings are struggling to cope with problems.
For instance, Kaisa Group Holdings suspended trading in Hong Kong-listed shares on Friday before the stock market opened. The company missed payment on a wealth management product.
Shimao Group Holdings also suffered losses on Friday, as its shares fell by more than 13%. It disclosed in a filing on Thursday that it will only allow institutional investors to buy seven of its Shanghai-traded bonds. Importantly, existing retail investors must sell or hold the bonds until maturity, the filing said.
The situation is quite complex, as Moody’s made 32 negative rating actions in the country’s property sector roughly the four weeks that ended October 26. As a reminder, the agency mentioned in a report that in late October that the rated developers will need to pay or reference billions of dollars worth of debt in the coming 12 months.
Lastly, authorities tried to reassure markets that the situation was under control. According to authorities, the China Evergrande Group is an isolated case. The country’s one of the largest developers avoided default in October. Last week, the company said it completed project deliveries involving 57,462 apartment owners from July to October. Still, the pace of deliveries generally slowed down month-on-month. In October, deliveries covered 39 projects and 7,568 apartment owners.