Chinese property stocks surged in Hong Kong on Tuesday after reports that the government could shore up support for some developers’ bonds.
Chinese regulators have reportedly ordered state-owned China Bond Insurance Co. Ltd to guarantee onshore bond issuances to a number of developers in the struggling sector, according to Reuters.
Stock prices in the named shortlist bounced up in response to the news, with Hong-Kong-listed shares in property developer Country Garden Holdings
up as much as 18% to 2.74 Hong Kong dollars early in the trading day and pared its gains later on Tuesday to a 9% rise
Shares of Gemdale Properties
rose 5% while investors snapped up shares in Longfor Properties
which reached highs of HK$26.40, a rise of almost 19%, and CIFI Holdings
which rallied 12.9% to HK$2.22.
China Bond Insurance Co provides financial guarantee services and will provide “full amount, unconditional and irrevocable joint liability guarantee” to the medium-term notes for a number of developers, according to the Reuters sources.
On Monday, markets intelligence firm REDD first reported the plan, and said six developers, including Country Garden Holdings and Gemdale, will receive underwriting and guarantees on their bond issues.
The debt relief for property developers in the country comes as concerns grow over the number of defaults in the real estate sector on both the dollar and yuan debt, most notably from developer giant Evergrande
which has more than $300 billion in liabilities, defaulted on its debts last year and most recently failed to meet its deadline to restructure the liabilities by the end of July.
The Hang Seng Mainland Properties index rose as much as 10.5% but is down 43% in the year to date.