Can Chinese developers overcome the Evergrande infection? Moody’s sees confidence deficit while analysts make turnaround bets

Name: World’s most indebted developer, China Evergrande Group, buys time to repay more creditors
Uploaded: 2021-10-31T23:30:26.000Z
Duration: 1 min 46 s
Description: World’s most indebted developer, China Evergrande Group, buys time to repay more creditors

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People stand next to a screen showing stock exchange and economic data in Shanghai. Photo: EPA-EFE

Zhang Shidongin Shanghai

Published: 7:30am, 1 Nov 2021

Some of China’s biggest developers are trading at multi-year lows, making them a magnet for analysts betting on a turnaround play. Moody’s said confidence in the sector remains fragile until access to funding for developers and home sales improve.

China Vanke, the biggest by market value, ended Friday’s trading at a three-year low in Shenzhen, while Greenland Holdings slumped in Shanghai to a level not seen since 2013. In Hong Kong, Country Garden also teetered near a 2018 low.

The sell-off, triggered by a credit squeeze at China Evergrande and other distressed peers, was compounded by rating downgrades and data showing sales in the world’s biggest housing market shrank 16 per cent in September from a year earlier, while new housing starts fell 14 per cent.

“Market confidence is unlikely to return unless developers can substantially reduce their leverage and repay maturing debt without impairing their balance-sheet liquidity,” said Kai Yin Tsang, an analyst at Moody’s, which downgraded bonds issued by developers 32 times in September and lowered the sector outlook to negative.

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World’s most indebted developer, China Evergrande Group, buys time to repay more creditors

The outlook stays unless funding access improves, sales in the US$2.7 trillion market return to growth path in the next six to 12 months, and the stock of unsold homes does not get worse, he added.