Investors Dump China Property Shares, Bonds as CIFI Defaults

Chinese property shares and bonds were dumped by investors on Wednesday after a media report that developer CIFI Holdings had defaulted.

Credit intelligence provider Reorg reported that CIFI had failed to make payment on certain non-standard debt. Its Hong Kong-listed shares then plunged 32.3%, hitting a record low.

The news added to China’s property market woes. Official data showed home prices, sales and investment all falling in August, adding pressure on the sputtering economy.

A number of leading developers have now defaulted on bonds, and local governments are scrambling to arrange funds to fix these problems so that construction can resume at stalled projects.

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Investor Chaos

In Shanghai, bonds issued by property firms including CIFI Holdings, Sunac Real Estate and Gemdale Corp were among the biggest losers.

The Shanghai Stock Exchange briefly suspended trading in a CIFI bond, citing abnormal fluctuations.

Investors are worried that the sector’s cash crisis is finally reaching CIFI, which had been considered one of the country’s few relatively resilient private developers, Shujin Chen, head of China FIG Research at Jefferies, said.

“The overall fragile investment sentiment in the wake of the sterling drop and global monetary policy uncertainties certainly did not help,” she added.

Sharp stock market losses this week also show investors don’t expect fresh property stimulus measures to be announced during or immediately after the 20th Communist Party Congress, which begins on October 16.

Chasing Survival

CIFI Holdings missed payment of debt under a project company known as Tianjin Xingzhou Real Estate Development Co, Reorg reported, citing sources.

In a letter to employees dated Tuesday September 27, CIFI Chairman Lin Zhong said the company’s priority now is to survive, as property sales in China remain sluggish amid Covid lockdowns, an economic slowdown, and a mortgage payment boycott affecting over 300 projects.

“Hardship and ordeal will persist for quite a long period of time,” Lin said in the letter, which was widely distributed via social media and confirmed by the company.

“Although we have more than 30 billion yuan ($4.14 billion) of cash sitting on the books, the overwhelming majority of it could not meet reasonable demand by companies,” CIFI’s letter said.

“In the coming months, CIFI’s cash flows will meet unprecedented challenges.”