China Vanke’s biggest shareholder’s pledge to fully support the company sends its shares, bonds higher

China Vanke, China’s second largest property developer by sales, said it will make timely repayments of its debts after a Chinese authority, which is also its largest shareholder, vowed support to “revitalise the bulk assets and promote the liquidity” of the company.

The developer’s largest shareholder Shenzhen Metro Group, which holds a 27.9 per cent stake, said it would boost the finances of the company by purchasing some of its urban renewal projects in Shenzhen worth an estimated amount of more than 10 billion yuan (US$1.37 billion/HK$10.9 billion) and by purchasing Vanke’s bonds in the open market at a suitable time, according to a filing by China Vanke late on Monday.

The announcement inspired a rally in the developer’s stocks and bonds. Shares of Vanke gained as much as 2 per cent on Tuesday morning before surrendering gains to close at HK$8.08, down 0.7 per cent on the day, while its dollar bonds due June 2024 rose by 5.489 cents to 92.102 cents on the dollar.

The statement came after an online meeting arranged by Vanke with several financial firms on Monday afternoon, where the developer gave an update about its recent business operation and financial status.

The Shenzhen state asset regulator (SASAC), which wholly owns Shenzhen Metro, also attended the meeting, and its senior official Ye Xinming said “Vanke is an important member of SASAC” and it will “fully support Vanke when it faces risks at an extreme situation” on a basis of not disobeying law and market rules, according to a meeting memo obtained by the Post.

Yu Liang, vice-chairman of Vanke, said he believed that the company will “overcome difficulties with support of SASAC” despite the challenges it faces in restoring confidence of homebuyers.