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Chinese Developer Shimao’s Bonds Soar as Regulators Offer Help

A Shanghai Shimao Co bond that matures in January 2022 rose 11.7%, making it the top gainer on Shanghai Stock Exchange’s corporate bond market


Shimao
New construction starts measured by floor area fell 11.4% in 2021 from the same period a year earlier, compared with a 9.1% drop in the first 11 months of the year. Photo: Reuters.

 

Bonds issued by a subsidiary of China’s Shimao Group Holdings – rocked recently by concerns over the developer’s financial health – jumped as much as 12% in Shanghai on Thursday, after local media reported that the city’s regulators have offered to help the embattled industry.

A Shanghai Shimao bond that matures in January 2022 rose 11.7%, making it the top gainer on Shanghai Stock Exchange’s corporate bond market on Thursday.

It is still trading at 73.5 yuan though, compared with a face value of 100 yuan, as the market prices in the chance of a default.

Most of Shimao’s other bonds in Shanghai also rose sharply, while Shimao Group shares rebounded more than 6% in morning trading in Hong Kong.

Rumours that the People’s Bank of China had discussed a potential lifting of restrictions on its policies controlling developers’ leverage has led to a jump in stocks and offshore bonds of Shimao and other developers, such as Country Garden, Sunac China Holdings, Yuzhou Group and China Aoyuan.

“Volatility and wild price swings remain the norm in a market susceptible to rumour,” Stephen Aldred of Reorg, a credit intelligence provider in New York, said.

 

Meetings with Regulators

Regulators in Shanghai, including local branches of the People’s Bank of China and the China Banking and Insurance Regulatory Commission, held meetings with some real estate firms on Wednesday and on December 9, local media reported.

The regulators urged developers to assume their repayment obligations, while offering to help meet developers’ rational funding needs to help the firms manage their difficulties, according to the reports.

Chinese developers have been under enormous strain during the year, with many grappling with a liquidity crunch as Beijing has pursued a relentless regulatory quest to reduce leverage of the heavily-indebted sector.

Shimao Group’s shares and bonds had been roiled recently by signs of liquidity strains.

 

  • Reuters with additional editing by Jim Pollard

 


 

ALSO SEE:

 

 

China Developer Shimao Warns Of Asset Selling Over Sales Gap

 

China Property Bonds Bounce Back, But Evergrande Misses Out

 

China Property Stocks Surge on Reports of Policy Easing

 

 

 

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.