HONG KONG — Shares in Chinese property developers surged on Wednesday after Beijing expanded a financing program that is expected to support bond issuance in the crisis-ridden sector.
Shares of Country Garden soared 23% and Longfor Group jumped 17%. The Hang Seng Mainland Properties Index rose 8%.
The National Association of Financial Market Institutional Investors announced on Tuesday evening that it will widen a program to support about 250 billion yuan ($34.5 billion) of debt sales by private firms, including those of property developers.
The semi-official association under China’s central bank also said the program can be expanded.
The move comes as property developers in China, faced with a stifling cash squeeze, struggle to tap new sources of funding to finish apartment construction and pay suppliers. A string of developers have defaulted on their offshore debt obligations in the past year.
More recently, investors have been fretting that the crisis is deepening as companies believed to have had government backing were also missing payments such as CIFI Holdings and Greenland Holdings.
“We think this is a big step to help ease liquidity for top private developers after recent defaults,” said Shujin Chen, an analyst with Jefferies said in a note to clients.
Chen added that even so he still expected to see more defaults in the sector given the weak recovery in property sales.
Offshore dollar bonds issued by Chinese private developers also rebounded. A Seazen 2026 bond was trading at 14.35 cents on the dollar on Wednesday, according to Duration Finance, more than 3 cents higher than a day earlier. ($1 = 7.2520 Chinese yuan) (Reporting by Xie Yu and Clare Jim; Editing by Edwina Gibbs)