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‘No one immune’ amid China property turmoil, JPMorgan says

‘No one immune’ amid China property turmoil, JPMorgan says
Residential buildings in the Kangcheng neighbourhood of Shanghai, China, on Monday, 1 August 2022. (Photo: Qilai Shen/Bloomberg)

Chinese developers may report a 30% year-on-year decline in first-half earnings due this month, which will likely weigh on sentiment, according to JPMorgan Chase & Co analysts.

“No one is immune” amid the industry turmoil and investors’ concerns about the liquidity of most private developers are set to linger, analysts including Karl Chan wrote in a note on Sunday, as they downgraded developers including CIFI Holdings Group and KWG Group Holdings Ltd.

At least $90 billion has been wiped out in China’s property stocks and dollar bonds this year, and a bursting housing bubble and an intensifying debt crisis threaten to inflict even more pain. Pessimism has deepened after Beijing signalled that homeowners, not builders, will be the priority in the authorities’ efforts to stabilise China’s slumping housing market.

Most developers’ shares tracked a decline in the broader market on Monday. A Bloomberg Intelligence gauge of builders fell as much as 0.7% to head for its first decline in three days. 

Chinese high-yield dollar bonds, which are dominated by issuance from property developers, gained about 0.5-1 cent on the dollar on Monday, according to credit traders. 

China’s home prices fell for an 11th month in July, underscoring how government relief efforts have so far failed to curb the nation’s spiralling property crisis. Home prices declined 0.1% in July from June. 

The banking regulator said on Friday that it will meet developers’ “reasonable financing demands effectively” and support their mergers and acquisitions and restructuring of property development projects. 

Hong Kong trading halts freeze $15bn after earnings delays

However, the analysts said until there are stronger policy responses and proof of a recovery in sales, the sector’s shares are likely to remain lacklustre. The brokerage doesn’t expect companies that are still suspended from trading – including China Evergrande Group and Shimao Group Holdings – to release first-half results, and there’s also a risk of non-publication for others.

To be sure, there might be a potential short-term rebound in September due to an improvement in month-on-month sales during a traditional peak season, and speculation about strong policy support from the central government after a key party meeting, the analysts wrote. BM


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