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China’s real estate stocks tumble as Evergrande crisis reverberates

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SHANGHAI – Shares of Chinese real estate firms fell further on Thursday as investors worried about a debt crisis that swept through developers, including China’s Evergrande Group, a day after the sector was hit. for new rating downgrades.

Evergrande, which has more than $ 300 billion in liabilities and 1,300 real estate projects in more than 280 cities, missed a third round of interest payments on its international bonds this week, spooking investors.

The world’s most indebted developer, which has been trying to sell assets to raise funds, appeared to have made little progress toward that goal when Qumei Home Furnishings Group announced in a filing Thursday that it will buy Evergrande Group’s 40% stake in its furniture. joint venture for 72 million yuan ($ 11.18 million).

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But some other Chinese developers recently warned they could default, and rising risks in the sector prompted rating agency S&P Global to deliver further downgrades on Wednesday to two of the largest firms in the industry, Greenland Holdings, which has built some of tallest residential towers in the world. and E-house, warning that it could lower your ratings further.

In addition to concerns from investors increasingly expecting policy easing to stabilize a shaky recovery in the world’s second-largest economy, new data on Thursday showed that annual prices at factories in China rose at the fastest pace. fast registered in September due to the rise in crude oil. prices of materials.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said persistent inflationary pressure would limit the scope of any easing of monetary policy.

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“But the most important policy in real estate is not monetary policy, but regulation related to leverage and the supply of bank loans for developers (and) home buyers,” he said.

“So, I think the government still has the option to relax those policies to help the real estate sector. The big question is whether they are willing to do it. So far his political stance seems pretty firm. “

On Thursday, a tracking sub-index of Chinese property developers’ stocks fell nearly 3% at noon, while the broad CSI300 blue-chip index fell 0.31%. Ownership shares are down nearly 19% this year, compared to a 5.5% drop for the CSI300.

Price action in the onshore bond market was relatively subdued after large movements in recent sessions. Guangzhou R&F’s 6.7% exchange-traded bond from April 2022 was up 0.34%, but was still trading at a discount of more than 35% to its face value.

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Shanghai Shimao Co’s January 2022 4.65% bond was the biggest loser among corporate bonds traded on the Shanghai Stock Exchange, according to exchange data, falling 3.16% to 92.48 yuan.

In international debt markets, Agile Group Holdings’ 6.875% perpetual bond fell more than a penny to 69.5 cents.

Hong Kong markets were closed on Thursday for a public holiday.

Global concerns about the potential for a spill-over from China’s real estate credit risk into the broader economy remained widespread (or risk premium) in investment-grade Chinese companies, which tend to have the strongest finances, close to from its widest level in more than two months on Wednesday. at night US time.

The spread on the high-yield or junk-rated equivalent index that tracks companies like Evergrande fell back on Wednesday, but stayed near record highs.

($ 1 = 6.4391 Chinese yuan)

(Reporting by Andrew Galbraith; Editing by Muralikumar Anantharaman)

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