BEIJING, November 9 (TMTPost)— The Chinese government is expected to take further actions to bolster the property market as the news and rumors about real estate giant Country Garden Holdings Co. swirled.
China’s top regulators, including the People’s Bank of China (PBoC), the central bank, the National Financial Regulatory Administration (NFRA), the Ministry of Housing and Urban-Rural Development and the China Securities Regulatory Commission (CSRC), were reported to hold a meeting with multiple major property firms such as Vanke, Poly Real Estate Group, China Resources Land, Longfor Properties and Gemdale to understand these companies’ liquidity and their financing needs. These developers are among a few ones that have avoided defaulting, Caixin learned. The Chinese media group also learned the regulators also summoned three developers including Vanke, Longfor and Seazen Group last week. It cited analysts that recent meetings underlined Beijing’s concerns on individual developers’ difficulties and signaled authorities could introduced supportive measures to help the industry.
The news came after Vanke’s the largest shareholder--the state-owned Shenzhen Metro expressed its firm commitment to investments in the property heavyweight. Shenzhen Metro said earlier this week that it is working on various effective tools to support Vanke, including taking over some of the developer’s urban renewal projects in Shenzhen and capitalizing on its developments. Such move is made to inject new liquidity to Vanke and transaction value is expected to be more than RMB10 billion. Shenzhen Metro is also preparing for purchase Vanke bonds in the open market at appropriate time.
Right after Shenzhen Metro’s announcement, China’s largest insurer Ping An Insurance (Group) Co. was reported to rescue the embattled Country Garden.
China’s State Council has asked the provincial government of Guangdong, where both Ping An and Country Garden are headquartered, to help arrange a rescue for Ping An to take a controlling stake in Country Garden, Reuters reported on Wednesday, citing people familiar with the matter. Authorities are keen to solve Country Garden’s liquidity problems within Guangdong, and Ping An became a natural choice as it is right based in the province and has been a major shareholder, according to the report. If Ping An were to take a stake of more than 50% as regulators’ expectation and become Country Garden’s controlling shareholder, authorities would like to inject capital in stages to ease the property developer’s liquidity problem, the report said.
The aforementioned report sent Hong Kong-listed shares of Country Garden surging as much as over 17% intraday, and then settling around 12.2% higher on Wednesday. The shares jump increased US$320 million to Country Garden’s market capitalization, valuing the company at about US$3 billion, while Ping An shares in Hong Kong slumped 5.4% as of close, wiping out US$3.1 billion from its valuation.
Neither the State Council nor the Guangdong government responded to the report. Country Garden declined to comment on it. At a statement issued late Wednesday for clarification, Ping An denies the report about possible takeover of Country Garden. China’s top insurer said it was aware of Reuters’ report about authorities’ request for acquisition of Country Garden, which is totally inconsistent with the fact. The company has not received any relevant suggestions or requirements from authorities, and it doesn’t have any related transaction plan or talks, according to the statement.
Ping An also said it has not held any stakes in Country Garden as of Wednesday. The announcement suggested Ping An has liquidated Country Garden before the developer’s debt woes intensified. According to the interim report of Country Garden, as of June 30, 2023, there were two companies holding more than 5% of Country Garden's shares. One was Yang Huiyan's Best Limited, holding 52.6% of the shares; the other was Ping An Insurance, holding a stake of 5.37%. Ping An held a 4.99% stake as of August 11, according to Hong Kong stock exchange data.
Country Garden failed to make a US$15 million coupon payment on a bond due September 2025 when a 30-day grace period ended October 18. The company has said last month that it expects to be unable to fufill all the offshore debt obligations as scheduled and hopes to seeks a holistic solution to address the current offshore debt risks it is facing, so as to allows it to return to track of healthy development and protect rights and interests of all stakeholders including customers, employees creditors to the greatest extent.
China’s Central Financial Work Conference held last week highlights the government’s prioritization of economic and financial stability. Following the conference, new initiatives to support property developers could come out, which is helpful for promoting healthy development of companies in the industry, Yan Yuejin, research director of the Shanghai-based E-house China Research and Development Institute, commented on Wednesday.