Stock trading of Chinese property developer Kaisa halted in Hong Kong

Kaisa Group Holdings City Plaza development under construction in Shanghai, China, on Tuesday, November 16, 2021

Qilai Shen | Bloomberg | beautiful pictures

Stock trading of Chinese real estate developers Kaisa was halted on Wednesday for the second time in two months, as troubles in China’s property sector resurfaced this week.

The developer has been hit with debt issues, as they have been struggling to pay off their debt recently. Looks like it didn’t meet the $400 million foreign debt deadline on Tuesday, according to Reuters.

Kaisa suspends trading in early November for almost three weeks, following news that they missed a payment for a wealth management product.

No immediate reason was given for the suspension of the most recent transaction. Kaisa said in late November that it would restructure foreign debt payments due in December by offering investors $380 million in new bonds that are due now in 2020. 2023. US dollar bond initially worth $400 million.

But last week, the developer failed to fulfill its offer to exchange with bondholders. Among other options, bondholders can choose to purchase new bonds issued by Kaisa that can be exchanged for equity in several developer listed units. Analysts said the failure to reach an agreement increased the likelihood of Kaisa defaulting.

Among Chinese developers, Kaisa is the second-largest issuer of high-yield overseas bonds denominated in US dollars, according to French investment bank Natixis. Evergrande, the world’s most indebted property developer, came out on top.

Shares of Kaisa have fallen about 20% in the past month.

Evergrande, which has seen a debt crisis emerge in recent months, came back into the spotlight this week as it looks like it’s officially defaulted for the first time. There’s still no word from the developer on whether they’ve paid $82.5 million in interest – the 30-day grace period ended on Monday.

This would be the first time the company officially defaulted if so, as it managed to make a few final interest payments by the eleventh hour – within the grace period.

However, Evergrande, the world’s most indebted developer, is set to move towards debt restructuring that would include all public bonds and private debt abroad.

Sentiment was also lifted by China’s move towards emphasizing easing. On Monday, the country’s central bank said it would cut the reserve requirement ratio, or the amount of cash that banks must hold as reserves, for the second time this year. That frees up 1.2 trillion yuan ($282 billion) to fuel slowing growth amid the pandemic.

I think on the whole, the government understands that you’re going to have some setbacks, but this whole sector continues to be a very important part of the economy.

Teresa Kong

Head of Portfolio Management and Fixed Income, Matthews Asia

China’s real estate sector has been hit by the government’s moves to tackle debt. Evergrande’s problems became acute after the authorities introduced a “three red lines” policy last year. That policy places a limit on debt in relation to a company’s cash flow, assets, and capital levels. That’s starting to hold developers back after years of debt-driven growth.

Other Chinese property developers – besides Kaisa – are also starting to show signs of tension – some missed interest payments, while others defaulted entirely.

“The narrative for Chinese assets remains the same, given that China’s urbanization rate remains strong,” said Teresa Kong, head of portfolio management and fixed income at Matthews Asia. is in the early stages.

“So there’s still a lot more households going to form, especially in urban areas as workers continue to migrate out of rural areas into urban areas,” she told CNBC’s “Squawk.” Box Asia” on Wednesday. “I think overall, the government understands that you’re going to have some setbacks, but this whole sector continues to be a very important part of the economy.”

Kong also stressed that local provincial governments – which are very dependent on selling land to developers – need to think about alternative sources of revenue.

Read more about China from CNBC Pro Stock trading of Chinese property developer Kaisa halted in Hong Kong


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