Shares of Chinese property developers experienced a sharp decline on Monday due to a series of negative factors. This includes the suspension of bond trading by property giant Country Garden, worsening credit data, and profit alerts.
Country Garden shares tumbled 15% after the announcement that it would suspend trading of its 2016 yuan bond on the Shanghai Stock Exchange. This decision is aimed at resolving liquidity issues faced by the company. Year-to-date, the stock has plummeted 69% following news of missing $22.5 million in interest payments on its dollar bonds. As a result, Country Garden is anticipated to experience its worst loss since going public 16 years ago.
Investors are now questioning whether Beijing will step in to rescue Country Garden given its significant size and the potential ripple effects on the overall economy with further defaults. Analysts from Moody’s warn that Country Garden’s credit distress may spill over to China’s property and financial markets.
In addition to Country Garden, another property developer, China Jinmao Holdings, saw its shares decline by 6.5% after issuing a warning about an anticipated 80% drop in net profit. The company attributes this decline to weakness in China’s real estate market.
The impact of these developments was also felt on mainland exchanges, with China Vanke experiencing a 2.8% decrease in shares and Greenland Holdings observing a 1.9% decrease.
Overall, the economic recovery outlook is becoming increasingly uncertain as July’s economic indicators continue to trend downward. Credit data for July fell well below market expectations, with new yuan loans reaching their lowest level since 2009. This signifies a decrease in consumer and entrepreneur confidence in spending and investing.
Despite these challenges, the Chinese property market remains an area of interest for investors and analysts alike. As the situation unfolds, it will be crucial to monitor how these developments may impact the broader economy and the measures that Beijing may take to address these issues.