By Clarence Leong and Bingyan Wang
Shares of Chinese property developers rose convincingly on Wednesday after China pushed to expand debt financing for private companies in a bid to shore up the struggling sector.
Hong Kong’s Hang Seng Mainland Properties Index rose 7.3%, compared to a 1.2% decline for the city’s benchmark Hang Seng Index. Private developer CIFI Holdings (Group) Co. jumped 39% to recover losses over the past month, Country Garden Holdings Co. rose 24% and Longfor Group Holdings Ltd. increased by 8.8%.
A self-regulatory body comprising a range of financial institutions said on Tuesday it would expand bond financing tools under the guidance of the country’s central bank “to support private businesses, including property companies.”
The move is expected to support about 250 billion yuan ($34.49 billion) of private sector bond financing and can be expanded further, the National Association of Capital Markets Institutional Investors said.
It is the “second arrow” of a three-pronged policy approach used in 2018 when some private companies also ran into funding difficulties, he added.
The move is a signal that Beijing is willing to find ways to further alleviate the funding challenges faced by developers, said Ma Hong, a senior research fellow at Zhixin Investing Research Institute.
Low valuations for property stocks along with a series of supportive central bank policies in recent weeks sparked the stock market rally, he said.
Amid a prolonged sector downturn and gloomy homebuyer sentiment, even stronger developers have struggled with liquidity issues, and many have defaulted on their dollar-denominated debt. Beijing’s earlier moves to help the sector included a government-guaranteed bond program for a select group of private developers deemed higher quality.
Write to Clarence Leong at [email protected] and Bingyan Wang at [email protected]