China real estate shares, bonds slump on report of CIFI default

Central China Real Estate

28/09/2022 07:08

SHANGHAI, Sept 28 (Reuters) - Investors dumped shares
and bonds of Chinese property developers on Wednesday, after a
media report that CIFI Holdings (Group) Co had defaulted, adding
to worries over the crisis-stricken real estate sector. 
    Hong Kong-listed shares of CIFI Holdings  0884.HK  tumbled
26% in morning trading to a record low, after credit
intelligence provider Reorg reported that the Chinese developer
had missed payment on certain non-standard debt.
    In response to questions about the report, CIFI said it is
actively seeking solutions, without giving further details. The
company's website said it was China's eighth-largest listed
developer last year.     
    The share slump, which also came after CIFI's chairman
predicted "unprecedented" liquidity stress ahead, triggered
savage sell-offs in the sector.
    An index tracking mainland developers listed in Hong Kong
 .HSMPI  tumbled more than 5% to record lows. 
    In Shanghai, bonds issued by property firms including CIFI
Holdings, Sunac Real Estate  CN163377SH=  and Gemdale Corp
 CN175235SH=  were among the biggest losers. The Shanghai Stock
Exchange later said it was suspending trading in a CIFI bond due
to abnormal fluctuations.
    The panic selling, which weighed on an already bearish
market, reflects lingering investor pessimism toward the
property sector despite a slew of measures by Beijing to aid the
sector. 
    It also shows markets doesn't expect fresh property stimulus
to be announced during or immediately after the 20th Communist
Party Congress to be held from Oct. 16.     
    CIFI Holdings missed payment of debt under a project company
known as Tianjin Xingzhou Real Estate Development Co, Reorg
reported, citing sources.
    In a letter to employees dated Sept. 27, CIFI Chairman Lin
Zhong said the company's priority now is to survive, as property
sales in China remain sluggish amid COVID-19 outbreaks, an
economic slowdown, and a morgtage boycott. 
    "Hardship and ordeal will persist for quite a long period of
time," Lin said in the letter, which was widely distributed via
social media and confirmed by the company. 
    "In the coming months, CIFI's cash flows will meet
unprecedented challenges."
    A source with direct contact with Lin told Reuters that Lin
is under immense pressure, as there's no fresh, big policy
support in sight, so "it's unclear when the industry can see a
gleam of hope."
    Last week, CIFI was downgraded by Fitch Ratings, which cited
the developer's declining liquidity buffer and higher leverage. 
    Woes in China's property market worsened in August, with
official data showing home prices, sales and investment all
falling, adding pressure on the sputtering economy. A number of
leading developers have defaulted on bonds.   
 (Reporting by Shanghai newsroom; Editing by Kim Coghill)
 ((samuel.shen@thomsonreuters.com;  +86 21 20830018; Reuters
Messaging: samuel.shen.thomsonreuters.com@reuters.net))