China Growth Slows as Developer Woes Deepen: Evergrande Update

  • Bloomberg
  • Economic Indicators News
China Growth Slows as Developer Woes Deepen: Evergrande Update
Credit: © Reuters.

(Bloomberg) -- A slowdown in growth underlined the impact of the property market slump on China’s economy with the central bank cutting a key interest rate for the first time since early 2020 to support expansion of the world’s second-largest economy.

Gross domestic product grew 4% in the final quarter of 2021 from a year earlier, the National Bureau of Statistics said Monday, higher than the 3.3% rise projected by economists but slower than in previous three months. Home prices fell for a fourth consecutive month in December.

Some dollar bonds of Logan Group Co. tumbled to record lows, dragging down notes of other stronger real-estate companies. China’s largest developer Country Garden Holdings Co. is being impacted by the property crisis with its shares and bonds coming under pressure amid investor fears that a reportedly failed fundraising effort may presage declining confidence. 

Key Developments:

  • China’s Economic Growth Slowed, Prompting Interest Rate Cut
  • China Cuts Policy Interest Rate for First Time Since April 2020
  • Property Crisis in China Reaches Biggest Builder Country Garden
  • China’s Property Market Is Set for State-Dominated ‘Age of Rust’
  • Chinese Developer R&F Downgraded to Restricted Default by Fitch
  • China’s Economy Loses Steam Just as Omicron Spreads: Eco Week
  • Volatility in China High-Yield Property Bonds Hides Progress: BI

China’s Economic Growth Slowed, Prompting Interest Rate Cut (10 a.m. HK)

China’s economic growth weakened last quarter in the face of slow private spending, a property market crisis and virus outbreaks. 

GDP grew 4% in the final quarter of 2021 from a year earlier, the National Bureau of Statistics said Monday, higher than the 3.3% rise projected by economists but slower than in previous three months. For the full year, the world’s second-largest economy expanded 8.1%, well above the government’s target of “over 6%.” 

Some Logan Dollar Bonds Fall to Record Lows, Weighing on Peers (9:46 a.m. HK)

Some of Logan’s dollar bonds are tumbling to record lows, dragging down notes of other stronger developers. Logan’s 5.25% note due 2023 fell 8.7 cents on the dollar to 68.3 cents, set for its biggest drop on record, Bloomberg-compiled prices show. 

China Cuts Policy Interest Rate For First Time Since April 2020 (9:27 a.m. HK)

China lowered a key interest rate for the first time since the peak of the pandemic in 2020 as a property-market slump and repeated virus outbreaks dampened the nation’s growth outlook.

The People’s Bank of China cut the rate on its one-year policy loans by 10 basis points to 2.85%. That’s the first reduction since April 2020. It also slashed the rate on the seven-day reverse repurchase agreements by the same magnitude to 2.1%.

Goldman Favors Macau Gaming in Asia HY, Advises Diversification (9:25 a.m. HK)

Goldman Sachs (NYSE: GS ) prefers Macau gaming and “non-China property B rated corporates” in Asia high-yield credit, recommending that investors stay cautious and diversified among better quality developers.   

Increasing stress levels in China’s high yield property sector suggest policy easing measures have so far been “insufficient to stabilize credit flow to developers,” analysts Kenneth Ho and Chakki Ting wrote in a report dated Friday. 

China’s Property Crisis Reaches Biggest Builder Country Garden (7:47 a.m. HK)

Country Garden’s shares and bonds were hammered last week on concerns about confidence. The company is one of the few remaining large, better-quality private developers that had been largely unscathed by the liquidity crunch, even as peers such as Shimao Group Holdings Ltd. saw dramatic reversals in their credit ratings.

 

The firm is viewed as a bellwether for contagion risk, as unprecedented levels of stress in the offshore credit market threaten to drag good credits down with bad. With more than 3,000 housing projects located in almost every province in China, Country Garden’s financial health has immense economic and social consequences. 

If Country Garden starts showing signs of stress, it will severely damage already fragile investor and homebuyer confidence, posing threats to China’s economy and even social stability.

Goldman Already Raised 2022 Junk Default Estimate: China Today (7:42 a.m. HK)

For Chinese developers, a turn of the calendar page hasn’t turned around their fortunes. Their dollar bonds have declined to new lows. It’s only mid-January, and Goldman Sachs has already raised its default forecasts for the year. 

Strategists Kenneth Ho and Chakki Ting say stresses are piling up after the pick-up in proposals for bond exchanges or maturity extensions. They now expect a 19% default rate for high-yield developers, up from a previous estimate of 11.5%.

China Home Market Slump Deepens as Prices Fall for Fourth Month (7 a.m. HK) 

New home prices in 70 cities, excluding state-subsidized housing, slid 0.28% last month from November, when they dropped 0.33%, National Bureau of Statistics figures showed Saturday. Falling prices may dissuade homebuyers concerned about the value of their assets, making it harder for developers to sell properties and generate much needed cash. 

Recent moves by authorities to ease some of the restrictions on real-estate funding have done little to boost the market. Home loan demand stayed weak in December, with households’ mid- and long-term loans, a proxy for mortgages, increasing the least since February 2020. Year-end sales campaigns by developers added to downward pressure on prices. 

©2022 Bloomberg L.P.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100