Chinese property stocks are on track for a 14-year low, as stress in the sector continues to rise amid slumping home sales and deepening debt woes for major developers.
(Bloomberg) — Chinese property stocks are on track for a 14-year low, as stress in the sector continues to rise amid slumping home sales and deepening debt woes for major developers.
A Bloomberg Intelligence gauge of developer shares fell as much as 1.2% Wednesday, heading for its lowest closing since 2009. Times China Holdings Ltd. and China Evergrande Group led the declines.
The selling comes as Country Garden Holdings Co., China’s former top builder, is in the final hours to meet an interest-payment deadline and avert its first-ever dollar bond default. A continued slump in property investment and sales, which formed the weak spots in an otherwise upbeat set of latest Chinese economic data, highlights the need for stronger measures to contain an unprecedented housing crisis.
“The market is turning more bearish with Country Garden’s potential dollar bond default,” said Patrick Wong, a Bloomberg Intelligence analyst. The future of the industry “really depends on any further easing measures to support the housing market.”
Country Garden, which is at the center of China’s property crisis, must pay $15.4 million coupon on a dollar bond by the end of a 30-day grace period Oct. 17-18 or a default can be called. The company hasn’t clarified which day marks the official end of the grace period, given the initial missed deadline of Sept. 17 fell on a Sunday.
Two holders of the dollar note due 2025 said they had yet to receive the interest as of 12:00 p.m. Hong Kong time on Tuesday.
Meantime, Evergrande faces the once-unthinkable possibility of asset liquidation on Oct. 30 when a key court hearing takes place. A ruling to wind up the firm would wreak havoc on the struggling real estate giant that’s trying to finalize a restructuring plan to pay back creditors.
Latest data showed that home sales in China slid 3.2% on year in the first three quarters, while property investment plunged a more-than-expected 9.1%. The world’s second-largest economy expanded 4.9% in the July-September period from a year ago, beating the 4.5% median forecast among economists.
(Updates with latest property and economic data)
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