(Bloomberg) — Chinese developers’ bonds gained along with their shares after authorities began drafting a list of 50 real estate firms that would be eligible for financing, the latest move by Beijing to support the embattled property sector.
Most Read from Bloomberg
A Bloomberg gauge of China developer stocks gained as much as 7.6% in early trading to head for its biggest advance since September. Sunac China Holdings Ltd. led the sector’s rise as it rallied as much as 27%, while Seazen Group Ltd. and Agile Group Holdings Ltd. jumped more than 10% each.
The so-called white list may help alleviate fears of further contagion in China’s property sector, where even state-backed builders haven’t been immune from funding troubles. Still, it remains to be seen if the move will halt the industry’s long-running slump given that it does not represent a directive to banks to extend loans to real estate firms.
While the measure may help to boost confidence, the event is unlikely to mark the end of developer defaults, according to JPMorgan Chase & Co. analyst Karl Chan.
“Directionally this would be positive as it should enhance confidence from both homebuyers and banks,” Chan wrote in a note. “But if property sales of a non-SOE deteriorate substantially, we believe most banks may still be reluctant to extend support, as a white list may likely only serve as a ‘reference.’”
China Vanke, Seazen and Longfor were among the companies that were named in a draft of the funding list, people familiar with the matter said, asking not to be named because the information is private.
The list, which includes both private and state-owned developers, is intended to guide financial institutions as they weigh support for the industry via bank loans, debt and equity financing, people said. It couldn’t be determined which other developers were included on the draft list.
China Vanke Co. led gains in developers’ bonds after its 3.5% notes due 2029 rose 2.3 cents to 60.7 cents on the dollar on Tuesday morning. Longfor and Seazen’s notes also advanced, although the bonds still trade at distressed levels.
Read more: China Drafts List of 50 Property Firms Eligible for Funding
China’s biggest banks, brokerages and distressed asset managers were told to meet all “reasonable” funding needs from property firms at a Friday gathering with the top financial regulators, according to a government statement that didn’t mention a white list. Financial firms were also asked to “treat private and state-owned developers the same” when it comes to lending.
Still, some investors remain doubtful that the measures can reverse the sector’s slide.
“We want to see which private investors are actually on the list, as well as the size of the funding eventually delivered, because in reality, banks that have low risk appetite might not provide that much support,” said Andrew Zhu, fund manager at at Hainan Shire Asset Management Co.
(Updates throughout)
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
Read the full article here