A cooling real estate market has forced mainland developer China Merchants Property to scrap a 6.5 billion yuan (HK$8 billion) private placement and will probably hit peers with similar plans, analysts said.
The once bubbly market is now faltering much faster than many developers had expected, with property sales diving and a private survey showing the first fall in mainland home prices in almost two years last month.
With no signs of a relaxation of credit policy or a material pickup in broad economic growth, investors are increasingly worried about downside risks.
After its share price ended more than 36 per cent below the targeted private placement price of 26.92 yuan each - set in November - China Merchants Property announced last week that it was walking away from the plan for now and would redesign its scheme to better cater to the current financing environment.
"This is not a good time. Fund managers are staying back and property shares have hit their bottom," said David Hong, a senior researcher at mainland consultancy China Real Estate Information Corp. "If the central government relaxes property policies in July, China Merchants Property could come back in the second half, when the market improves."
Hong said the weak sentiment could also sour China Vanke's plan to convert all its foreign currency-denominated B shares, listed in Shenzhen, into H shares to be traded in Hong Kong.
The mainland's biggest developer by sales said on April 23 that the Hong Kong stock exchange had accepted its application and it listed various risks associated with the plan, including a volatile share price and possible property policy changes on the mainland.
A few small mainland cities have loosened policies in recent weeks to stimulate housing demand and more are expected to follow suit. However, analysts said the impact would be limited because banks were still tightening loans to the property sector.
A report yesterday by Rong360, a private search engine for financial products, showed that banks were still raising mortgage rates and prolonging approvals for mortgage loans late last month. Some small banks had stopped offering home loans while others required applicants to buy wealth management products first before extending loans, it said, after checking lending activities in 23 key cities.