Written by Xie Yu and Summer Zhen
HONG KONG (Reuters) – Some institutional investors in China and around the world are betting on an improving outlook as Beijing accelerates efforts to boost economic growth and revive its debt crisis-plagued real estate sector. is reconsidering China’s real estate bonds.
Investors started returning after the most aggressive economic stimulus package since the pandemic was announced on Tuesday, mainly in the real estate sector, triggering a rally in offshore bonds for real estate developers.
Beijing G Capital Private Fund Management Center, which specializes in credit investment, has placed an order worth “tens of millions of yuan” to buy real estate bonds for the first time in several months, chairman Li Yuan said.
Recent efforts have shown “a determination to revive the real estate sector…this is a big change,” Lee said.
The rise highlights the extent to which stimulus is restoring confidence in the sector, although analysts are divided on the prospects for a near-term recovery.
The sector, a pillar of the world’s second-largest economy, came under pressure after a regulatory crackdown on debt-motivated construction spooked investors and lenders alike and squeezed access to capital. Since 2021, we have been mired in crisis after crisis.
As sales slumped and many developers defaulted on their repayment obligations, the value of developers’ US dollar-denominated bonds fell to historic lows.
Bonds from major developers that did not default, such as China Vanke and Longfour Group, were among the rally’s biggest gainers.
Vanke dollar bonds due in November 2027 were up 70 cents against the dollar as of Thursday, up from 49 cents before Tuesday’s announcement, according to data from Duration Finance.
Longford bonds due in April 2027 rose from 75 cents to 84 cents over the same period, according to the data.
The defaulted developer’s offshore bonds also rose, with Country Garden’s dollar-denominated bonds due in September adding about 2 cents to trade at about 9.1 cents.
Since the announcement, real estate stock prices have also increased.
“Positive Stance”
Investor sentiment was further boosted two days after the stimulus package was announced, with Chinese leaders pledging to achieve an economic growth target of around 5% in 2024 and to “prevent the decline” in the housing market.
On Sunday, Guangzhou became the first tier-one city to lift all restrictions on home purchases, while Shanghai and Shenzhen lowered minimum down payment ratios for first-time home buyers and made purchases more accessible to non-local buyers. He announced that he plans to make it easier.
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Enhanced Investment Products, a $400 million Hong Kong-based hedge fund, is increasing its holdings in Vanke 2027 dollar bonds, chief investment officer Jason Zhang said.
“The stock price rebound may be bigger, but buying Vanke bonds provides a better margin of safety,” Jiang said.
A trigger for where the market goes next may be home sales statistics scheduled to be released after China’s week-long Golden Week, which ends on Oct. 7, Jiang said.
Another Hong Kong-based credit fund manager, who has up to 20% of his portfolio in real estate bonds, said he had stocked up before the announcement because he thought it was oversold.
The executive, speaking on condition of anonymity as he is not authorized to speak to the media, said the move could increase new home sales enough to revive the sector in the short term due to uncertainty about whether the measure could increase new home sales enough to revive the sector in the short term. He said he has since been working on financing.
Gramercy Funds Management, a Greenwich, Conn.-based distressed debt hedge fund, is betting on the sector’s revival with a portfolio of debt from defaulting developers. Philipp Meyer, deputy chief investment officer, said the rally is pushing earnings higher and that they will rise further as macro and sector fundamentals improve.
“Recent actions by the Chinese authorities confirm our positive stance and substantially reduce the risk of litigation for those who own these bonds,” Meyer said.
(Reporting by Xie Yu and Summer Zhen; Editing by Sumeet Chatterjee and Christopher Cushing)
