(Bloomberg) — Chinese developer shares tumbled following local media reports that China Evergrande Group has been ordered to tear down apartment blocks in a development in Hainan province. Evergrande halted trading in its shares.
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An index of Chinese developer shares slumped 2.8% as of 11:37 a.m. local time, with Sunac China Holdings Ltd. and Shimao Group Holdings Ltd. plunging more than 10%. A local government in Hainan told Evergrande to demolish 39 buildings in 10 days because the building permit was illegally obtained, Cailian reported on Saturday. Evergrande gave no details on the trading suspension other than saying it would make an announcement containing inside information.
Property firms have mounting bills to pay in January and shrinking options to raise necessary funds. The industry will need to find at least $197 billion to cover maturing bonds, coupons, trust products and deferred wages to millions of migrant workers, according to Bloomberg calculations and analyst estimates. Contracted sales for 31 listed developers fell 26% in December from a year earlier, according to Citigroup Inc. analysts. Evergrande’s sales dropped 99% and were 7% lower than November, the analysts wrote in a note dated Sunday. Sales for Shimao slid 25% from November.
The slump in developer shares wasn’t matched by their bonds. Chinese high-yield dollar bonds rose as much as 1 cent on the dollar on Monday morning, according to credit traders.
Key Developments:
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Evergrande Suspends Trading in Hong Kong
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Evergrande Told to Dismantle Illegal Buildings in Hainan: Report
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China Developer Shares Fall as Evergrande Halt Sparks Concerns
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China Developers’ 2022 Home-Sales Recovery Could Be Challenging
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Developer Cifi Offers to Purchase Outstanding 5.5% 2022 Bond
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Shimao’s Liquidity Woes May Persist on Home Sales Slump: React
China Developer Shares Fall as Evergrande Halt Sparks Concerns (10:38 a.m. HK)
The report will have a “big” impact on investor confidence, said Kenny Ng, a strategist at Everbright Sun Hung Kai Co. “Having to demolish a project that’s already been built costs [Evergrande] the invested capital and other fines.”
Evergrande Told to Dismantle Illegal Buildings in Hainan: Report (9:48 a.m. HK)
The government of Danzhou, a prefecture-level city in the southern Chinese province of Hainan, has asked Evergrande to tear down 39 illegal buildings in ten days, Cailian reported on Sunday, citing a document from the local government.
The report cited the document, which was dated Dec. 30, as saying that the Danzhou government said an illegally obtained permit for the buildings had been revoked so the buildings need to be dismantled.
Evergrande didn’t immediately respond to a request seeking comment and calls to Danzhou authorities went unanswered on a public holiday in China on Monday.
Shimao Shares Drop to Lowest Since 2009 Amid Persistent Liquidity Risks (9:50 a.m. HK)
Shares in Shimao Group Holdings dropped 5.9% to the lowest since March 2009 after the property company missed its targets.
“Risks to Shimao’s liquidity could extend into 2022 as a parade of unfavorable media headlines threatens to keep potential buyers at a distance,” Bloomberg Intelligence analyst Kristy Hung wrote in a note on Monday.
The company missed its lowered, 290 billion-yuan sales guidance for 2021 by 7%, with December’s sales tumbling 68% year-over-year and by 25% sequentially, to 12 billion yuan, according to China Real Estate Information Corp.’s preliminary data.
Evergrande Suspends Trading in Hong Kong (8:58 a.m. HK)
The company gave no reason for the trading suspension.
China Evergrande on Friday dialed back payment plans on billions of dollars of overdue wealth management products as its liquidity crisis showed little sign of easing.
Developer Cifi Offers to Purchase Outstanding 5.5% 2022 Bond (7:52 a.m. HK)
Cifi Holdings offered to buy the outstanding notes at $1,000.5 for each $1,000 in principal amount plus accrued and unpaid interest, it said in a statement to the Hong Kong stock exchange.
The Chinese developer will determine the aggregate principal amount of notes that it will accept for purchase. The offer to buy the $505.1 million of notes that remain outstanding will expire at 4pm London time on Jan. 7.
Developers Face $197 Billion Challenge (Jan. 2)
China’s property developers have mounting bills to pay in January and shrinking options to raise necessary funds.
The industry will need to find at least $197 billion to cover maturing bonds, coupons, trust products and deferred wages to millions of migrant workers, according to Bloomberg calculations and analyst estimates. Beijing has urgedbuilders like China Evergrande Group to meet payrolls by month-end in order to avoid the risk of social unrest.
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