This article is from the Australian Property Journal archive
ONE-time Chinese development behemoth Country Garden saw its stock price slashed by more than 18% yesterday, after it announced over the weekend it would suspend trading of onshore bonds to go with a potential US$7.6 billion first-half loss.
Country Garden fell to HKD$0.80 during trading, well below the 52-week high price of HKD$3.48 and a world away from its peak price of $HKD17.08 in June 2018, when China’s property sector was a key plank of the country’s economic growth.
Country Garden said last week it missed payments on two dollar bond coupons, and that it was expecting a net loss ranging from approximately US$6.24 billion to US$7.6 billion for the first half, compared to a $265 million profit for the same time last year. Country Garden said its first-half loss was “mainly due to the decrease in gross profit margin of the real estate business and the increase in impairment of property projects as a result of the decline in sales in the real estate industry”.
The company’s boss, Yan Huiyan, was recently among the richest women in Asia but has seen her wealth fall from US$29 billion just over two years ago to US$5.3 billion, according to Bloomberg data.
“We’re facing the greatest difficulties since our establishment,” Yang said in a statement.
“We firmly believe that the real estate industry will eventually return to the track of healthy and steady development after going through this round of profound adjustments.”
China’s real estate sector has been in crisis since late 2021, following Beijing’s regulatory crackdown with the introduction of the “three red lines” policy – guidelines on liability-to-asset, debt-to-equity and cash-to-short-term debt ratios – and development giant Evergrande starting to grapple with huge debt. The company is now dubbed “the world’s most indebted developer”.
New home sales by China’s 100 biggest developers slumped by 33% in the year to July. The real estate sector’s woes have flowed into the country’s greater economy, which is grappling with a number of issues. China has fallen into deflation for the first time in over two years, with its exports falling by a larger-than-expected 14.5% year-on-year and imports dropped 12.4%, and youth unemployment sits at a record high.
Moody’s said about $4.3 billion in onshore and offshore bonds Country Garden’s debt would be due or “become puttable” through the end of 2024, meaning the company will face obligations to bondholders.
