The Chinese real estate sector saw a massive erosion in value this year, continuing the wave of defaults from 2021. Prominent defaults of Evergrande and Fantasia in late 2021 led to a severe liquidity squeeze acrossthe entire sector, exacerbated by an economic slowdown brought on by pandemic-related lockdowns in China. Some of the prominent defaults this year included the likes of Ronshine China, Shimao Group, Greenland Holding, China Aoyuan, R&F Properties etc. However, Beijing has announced a series of measures since November, sparing an end-of-year rally in some names including COGARD, Longfor, and Road King.
As expected, the Chinese property sector dollar bonds were the worst performer this year, down almost 38% with China high yield dollar bond index down 15.1% and the Asia ex-Japan dollar bond index down 13.4% (see chart below).
The flood of defaults and the need to avoid them saw many of these companies resort to debt restructurings. While many developers' restructurings are in plans and are likely to be detailed over the coming quarter, a few of them have already come out with restructuring details.
To access a dedicated dashboard on defaults in the Chinese real estate space, click on the button below.
As default and downgrade fears continued to haunt markets, even higher grade developers like Country Garden saw its bonds lose over 90% of its value to even trade at distressed levels of ~8 cents on the dollar at the height of fears in early November.
However, since November, Chinese dollar bonds saw a recovery in prices on the back of a string of relief measures from Beijing to help the property sector:
- This began with a 16-point plan that was followed by $310bn in credit lines
- Allowing for equity refinancing by developers to ease their liquidity, reversing a longstanding ban
- The latest measure of asking banks to issue offshore loans to help developers repay debts.
The table below shows the marked difference in the performance of these bonds since November
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