There’s a new acquisition:
China Evergrande Group and its property-services arm were halted in Hong Kong stock trading amid a report that the developer agreed to sell a controlling stake in the unit to raise much-needed cash.
Trading of Evergrande was suspended pending an announcement on a “major transaction,” the developer said Monday in a stock exchange filing. Evergrande Property Services Group Ltd. said it was halted before an announcement on a possible offer of shares in the company.
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Hopson Development Holdings Ltd. plans to acquire a 51% stake in the property-services unit, according to Chinese financial news platform Cailian, citing unidentified people. Cailian amended an earlier report to clarify that the deal would give the unit a valuation of more than HK$40 billion ($5.1 billion). Hopson Development shares were also halted, and its bonds plunged on the news.
And another default looming:
People familiar with the matter have said that a dollar note maturing Oct. 3 issued at an initial amount of $260 million by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande. As the maturity is a Sunday, the effective due date is Monday. The issuer is a joint venture whose owners include Hengda Real Estate, Evergrande’s main onshore unit.
Non-payment of the bond principal would constitute a default as the note has no grace period, although five business days would be allowed if failure to pay is down to administrative and technical error, according to the people. Details of the guarantees weren’t broadly known as the note prospectus isn’t publicly available and the deal wasn’t listed on exchanges. Monday is a holiday in China.
And another developer sliding into the abyss:
Fantasia Holdings Group Co. didn’t repay a $205.7 million bond that was due Monday, according to a company statement. Separately, property management company Country Garden Services Holdings Co. said that a unit of Fantasia didn’t repay a 700 million yuan ($108 million) loan that also came due on Monday and that a default was probable.
Plus some monetary easing on the ground:
Home mortgage rates in some Chinese cities decline recently after climbing for months, which some believe is a signal of easing mortgages after top financial regulators pledged twice in a week to maintain housing market stability and safeguard home buyers’ legitimate rights.
China’s average home mortgage rates for first-time home buyers stood at 5.46 per cent in September, up 23 basis points from the end of last year, and average mortgage rate for second-home buyers stood at 5.83 per cent last month, rising 29 basis points from the end of 2020, according to data from the China Real Estate Information Corporation (CRIC).
While the uptrend remained, some cities have seen easing signs. In Guangzhou, capital of South China’s Guangdong province, mortgage rates offered by branches of major banks including Bank of China, Agricultural Bank of China, Bank of Guangzhou, China Merchants Bank and China Everbright Bank have declined, according to the state-run China Securities Journal, citing industry data.
For instance, mortgage rate for first-time home buyers at the local branches of China Everbright Bank fell by 40 basis point to 5.6 per cent and the rate at the Bank of Guangzhou fell to 5.45 per cent.
In Foshan, a smaller city in Guangdong, mortgage rates offered at branches of China Construction Bank and Agricultural Bank of China fell by 20 basis points, though three major banks maintained mortgage rates unchanged and two banks raised the rates.
Notably, in the first eight months of the year, banks in Guangzhou raised home mortgage rates for both first-time buyers and used home buyers five times in a row, making the city’s mortgage rates the highest among the four tier-one cities.
In addition, “some banks are accelerating granting of mortgage loan to new home buyers, some buyers receiving loans within two months of application,” a Guangzhou-based property brokerage told Yuan Talks.
“For quite a while, banks had tightened mortgage loans, with some banks halting loans to second-hand home buyers, which hindered home purchases by those with real home demand and led to a repaid decline in home transactions and second-hand home prices,” said Li Yujia, chief researcher at the Housing Policy Research Center of Guangdong Province.
“The policy unintentionally hurt those with real housing demand and is against the principle for common-wealth and the top authority’s requirement to prevent one-size-fit-all approach, which will hurt the stability of the housing market,” said Li.
“To solve problems in the housing market, a long-term strategy is needed. To maintain a stable housing market, bank loans must keep up to support reasonable housing demand,” he said.
“The central bank has called for efforts to safeguard home buyers’ legitimate rights. I think home mortgage loans for first-time home buyers and those who sell one house to buy a new one will increase,” he added. “The drop in home mortgage rates in Guangzhou is an important signal.”
The People’s Bank of China (PBOC) said at its third-quarter monetary policy meeting last week that it’s important to “maintain the healthy development of the real estate sector and the lawful rights and interests of residential housing consumers.”
It’s going much as expected:
- Local creditors bailed out.
- Foreign creditors bailed in.
- Incremental easing to fight off property contagion.
- “Three red lines” still in place meaning things get worse before they get better and an ongoing hard landing.