Longfor taps bond guarantee plan, sending stocks soaring amid hopes that China’s financial lifeline can save more property developers

Longfor’s application to issue a 20 billion yuan midterm note was accepted by the National Association of Financial Market Institutional Investors (Nafmii)

That made Longfor Group Holding the first among China’s private-sector property developers to tap the central bank-backed bond guarantee programme

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The Upper Riverbank, a residential project by Longfor Group Holdings and KWG Group, located at 11 Muk Tai Street in Hong Kong’s Kai Tak area, on 27 September 2019. Photo: Martin Chan.

Published: 1:26pm, 11 Nov 2022Updated: 5:22pm, 11 Nov 2022

Longfor Group Holdings Limited’s shares jumped in Hong Kong trading, after the property developer successfully tapped a bond guarantee scheme by the Chinese government for funds.

Shares of the Beijing-based developer soared by 29 per cent to close the day at a three-week high of HK$18.20.

Longfor’s application to issue 20 billion yuan (US$2.8 billion) of midterm notes was accepted on Thursday by the National Association of Financial Market Institutional Investors (Nafmii), becoming the first private-sector developer to tap the loan guarantee programme backed by the People’s Bank of China.

The programme is the crucial “second arrow” in the Chinese government’s quiver of financial support for the nation’s beleaguered property industry, saddled with billions of dollars worth of overdue bonds, tens of thousands of unfinished homes strewn across the country and dozens of developers teetering on the brink of bankruptcy.

Altogether, the Nafmii plan announced last week offers 250 billion yuan of financial support for developers to ease their liquidity crunch. The plan also provides credit enhancement by the China Bond Insurance Corporation at an annual cost of 0.8 per cent, half of the normal fee.

“We are positively surprised by the prompt reaction of Nafmii, which indicated high priority [placed on] the scheme by regulators,” said Raymond Cheng, managing director of CGS-CIMB Securities. “Longfor [took] 8 per cent of the 250-billion yuan program, which is much higher than expected. This suggests that most of the notes [may be] likely to go to private developers, versus the expectation of 20 to 30 per cent only.”