Several of China’s major property developers saw significant drops in bond and stock values following weak home sales data that underscored the country’s worsening real estate crisis. China Vanke Co.’s 3.5% dollar bond due in 2029 fell 5 cents on Tuesday to 42.4 cents, marking its steepest one-day decline since March.
Other developers experienced similar downturns. Longfor Group Holdings Ltd.’s 3.95% dollar bond, also due in 2029, dropped by about 2 cents to 65.1 cents, approaching its lowest level since May, according to Bloomberg data.
Chinese property developers continue to face mounting pressure as property sales decline and concerns about liquidity grow. Vanke reported a 24% drop in contracted sales for August compared to the previous year, worsening from a 13% decrease in July. This followed the company’s first half-year loss in over 20 years.
A Bloomberg index tracking Chinese real estate stocks fell by as much as 5.3% on Tuesday, the largest intraday drop since May, after several developers were removed from the China-Hong Kong stock connect program. Shares of CIFI Holdings Group Co. plunged by as much as 29%, while Vanke shares dropped by 3.1% in Hong Kong.
“Investors are reacting to weak property sales data with no clear signs of stabilization,” said Ting Meng, senior Asia credit strategist at ANZ Banking Group Ltd. “It will take time for the industry to recover,” she added.
Earlier this month, S&P Ratings downgraded China Vanke’s long-term rating from BB+ to BB-, citing weak sales and diminished liquidity. The firm projects Vanke’s contracted sales will decline by 35% in 2024 and 18% in 2025.
Despite regulatory efforts to revitalize the sector, China’s residential property market continues to worsen. In August, the 100 largest real estate companies reported a 26.8% year-on-year decline in new-home sales, totaling 251 billion yuan ($35.4 billion), a deeper slump than July’s 19.7% drop, according to preliminary data from China Real Estate Information Corp.
“The market has been waiting for more decisive policy measures to support the property sector, but these have not materialized,” said Clement Chong, head of fixed income research at Eastspring Investments. “Investor confidence in a sustained recovery remains low,” he added.
