December 6, 2023

(Bloomberg) — Chinese developers’ bonds rose along with their shares after authorities drafted a list of 50 real estate firms eligible for financing, the latest move by Beijing to support the troubled property sector. .

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A Bloomberg gauge of China’s developer shares rose as much as 7.6% in early trading, its biggest gain since September. Sunac China Holdings Ltd. led the sector’s gains as it rose as much as 27%, while Cezanne Group Ltd. and Agile Group Holdings Ltd. jumped more than 10% each.

The so-called white list could help ease fears of further infections in China’s property sector, where even state-backed builders have not been spared funding problems. Still, it remains to be seen whether the move will halt the industry’s long-running slowdown, as it does not represent a directive to banks to lend to real estate firms.

According to JPMorgan Chase & Co. analyst Carl Chan, while the measure may help boost confidence, the incident is unlikely to lead to an end to developer defaults.

“On the face of it, this would be positive as it would boost confidence of both homebuyers and banks,” Chan wrote in a note. “But if asset sales to non-SOEs decline significantly, we believe most banks may still be reluctant to provide support, as a white list will likely only serve as a ‘reference’. Can do.”

China Vanke, Cezanne and Longfore were among the companies named in the draft funding list, the people familiar with the matter said, asking not to be named because the information is private.

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

Developers’ bonds led the way after China Vanke Co. rose 2.3 cents to 60.7 cents on the dollar on Tuesday morning after its 3.5% notes due 2029 traded higher. Longfor and Cezanne notes also advanced, although bonds still traded at distressed levels.

Read more: China lists 50 property firms eligible for funding

China’s biggest banks, brokerages and distressed asset managers were asked to meet all “reasonable” funding needs from asset firms at a Friday meeting with top financial regulators, according to a government statement, including a white list. Was not mentioned. Financial firms were also asked to “treat private and state-owned developers equally” when it comes to lending.

Still, some investors are skeptical that these measures can reverse the sector’s decline.

“We want to see exactly which private investors are on the list, as well as the size of funding ultimately distributed, because realistically, banks with lower risk appetite may not provide as much support,” the fund manager. Andrew Zhu said. Hainan Shire Asset Management Company

(full update)

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