Shares of Country Garden fell to a fresh eight-month low on Monday, extending losses on renewed debt concerns over China’s property sector.
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Chinese real estate shares tumbled on Monday, led by shares of country garden fell to a fresh eight-month low on fresh debt concerns for Chinese property developers.
Hong Kong-listed shares of country garden fell nearly 7%, its lowest level since early November, its property services arm National Park Service down more than 15%.
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JP Morgan downgraded both companies to lower levels and more than halved the target price of Country Garden and its real estate services listings. Bank analysts warn that unless the Chinese government offers more policy support, liquidity concerns are likely to remain.
The Hang Seng Mainland Property Index, a measure of Chinese property counters listed in Hong Kong, fell more than 5%, falling short of the index. Hang Seng Index fell 1.5%.
Shares of longfor group fell 9% on Monday, while Sunac down nearly 6%, Chinese Vanke fell 3.4% and China’s overseas land and investment down 3.16%.
Country Garden is considered one of the largest property developers in the mainland. A move last week to refinance part of its 2019 lending facility failed to reassure investors of its ability to repay, Reuters reported.
JP Morgan analysts have slashed their price targets for Country Garden by more than 60% to HK$0.9 and Country Garden Services by almost 70% to HK$6.7.
Monday’s drop for China’s property sector followed heavy losses last week due to weak property-related data and property giant Evergrande’s overdue earnings report showing the full extent of its default.
The country’s real estate sector is struggling to emerge from the credit crunch after the government reduced debt levels in August 2020.
Years of massive growth have resulted in the construction of ghost towns where supply far exceeds demand, as developers seek to capitalize on the desire to own a home and invest in real estate.
Weakness in China’s property sector could be a drag on the economy for years to come and could even affect countries in the broader region, Wall Street banks say. Warned.
Goldman Sachs economists say the real estate market is expected to see a “L-shaped restoration” — defined as a sharp decline followed by a slow recovery.
Official data last week showed a Real estate investment down 7.9% for the period from January to June. It is steeper than down 7.2% reported from January to May.
Last month, China’s second largest developer China Vanke says the sector is “really under pressure in the short term” and the situation is “worse than expected,” according to a translation by CNBC.
Last Monday, real estate giant Evergrande posted a match loss of 81 billion USD in its long delinquent income statement. The world’s most indebted property developer fell into default in 2021 and announced an external debt restructuring program in March, as the company struggled to complete projects and repay suppliers and lenders.
