Chinese developers’ shares, bonds stumble again as Kaisa, units suspended

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FILE PHOTO: A construction site by Chinese property developer Kaisa Group is seen at an area of downtown Shanghai

HONG KONG/SHANGHAI (Reuters) – A rout in shares and bonds of Chinese property developers deepened on Friday as Kaisa Group Holdings Ltd and three of its units had their shares suspended, a day after Kaisa said an affiliate had missed a payment on a wealth management product.

Shenzhen-based homebuilder Kaisa, which has guaranteed the wealth management product, said in a statement on Thursday it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades.

A Hong Kong stock exchange filing showed Kaisa’s shares were suspended as of Friday. The exchange did not elaborate.

Kaisa’s troubles come amid concerns about a broadening liquidity crisis in the Chinese property sector, with a string of offshore debt defaults, credit rating downgrades and sell-offs in the developers’ shares and bonds in recent weeks.

The Hong Kong-listed shares of Kaisa, which has a market value of about $1 billion, plunged more than 15% on Thursday to an all-time low.

In early trade in Hong Kong, a sub-index tracking the mainland property sector fell more than 2%, deepening its losses in the past two weeks to nearly 20%. An index of real estate A-shares fell more than 1.6% against a 0.25% drop in the broader blue-chip index.

Shares of China Evergrande Group, once China’s largest property developer and whose debt woes have sparked off a liquidity crisis across China’s $5 trillion property sector, fell 1.7%. The company’s 11.5% October 2022 bond fell more than 10% to yield above 300%, according to Duration Finance, leading sharp falls across developers’ bonds.

An ETF tracking Asian high-yield dollar bonds slumped nearly 1.5% in early trade, while spreads on Chinese high-yield dollar debt hovered near record highs.

“Kaisa could likely be another Evergrande,” said Raymond Cheng, head of China research at CGS-CIMB Securities, adding that the companies woes had intensified market concerns over developers’ liquidity conditions.

“Even though the regulators have some easing measures … it seems that may not be able to help that much,” he said. “Unless the government has aggressive loosening measures … we expect to see more and more developers have problems (paying) off their debts.”Kaisa has the most offshore debt coming due over the next year of any Chinese developer after embattled China Evergrande Group, which is reeling under more than $300 billion in liabilities.

(Reporting By Donny Kwok and Anne Marie Roantree in Hong Kong and Andrew Galbraith in Shanghai; Editing by Jacqueline Wong and Shri Navaratnam)