Property stocks surge after Beijing drafts list of 50 firms eligible for financing - The Straits Times

SHANGHAI – Chinese developers’ bonds gained along with their shares after the authorities began drafting a list of 50 real estate firms that would be eligible for financing, the latest move by Beijing to support the embattled property sector.

A Bloomberg gauge of China developer stocks rose as much as 7.6 per cent in early trading on Nov 21, heading for its biggest advance since September. Sunac China Holdings led the sector’s rise, rallying as much as 27 per cent, while Seazen Group and Agile Group Holdings jumped over 10 per cent each.

The so-called “white list” may help alleviate fears of further contagion in China’s property sector, where even state-backed builders have not been immune from funding troubles. Still, it remains to be seen if the move will halt the industry’s long-running slump, given that it does not represent a directive to banks to extend loans to real estate firms.

While the measure may help to boost confidence, the event is unlikely to mark the end of developer defaults, according to JPMorgan Chase analyst Karl Chan.

“Directionally, this would be positive as it should enhance confidence from both home buyers and banks,” Mr Chan wrote in a note. “But if property sales of a non-SOE (state-owned enterprise) deteriorate substantially, we believe most banks may still be reluctant to extend support, as a white list may likely only serve as a ‘reference’.”

China Vanke, Seazen and Longfor were among the companies that were named in a draft of the funding list, people familiar with the matter said. Vanke led gains in developers’ bonds after its 3.5 per cent notes due in 2029 rose 2.3 cents to 60.7 cents on the dollar on the morning of Nov 21. Longfor’s and Seazen’s notes also advanced, although the bonds still trade at distressed levels.

The list, which includes both private and state-owned developers, is intended to guide financial institutions as they weigh support for the industry via bank loans, debt and equity financing, people said. It could not be determined which other developers were on the draft list.

China’s biggest banks, brokerages and distressed-asset managers were told to meet all “reasonable” funding needs from property firms at a Nov 17 gathering with top financial regulators, according to a government statement that did not mention a white list. Financial firms were also asked to “treat private and state-owned developers the same” when it comes to lending.

Still, some investors remain doubtful that the measures can reverse the sector’s slide.

“We want to see which private investors are actually on the list, as well as the size of the funding eventually delivered, because, in reality, banks that have low risk appetite might not provide that much support,” said Mr Andrew Zhu, fund manager at Hainan Shire Asset Management. BLOOMBERG

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