Wed. Sep 20th, 2023
Shares of Country Garden fell to a record low after internal bond trading halted

Written by Claire C

HONG KONG (Reuters) – Shares in Chinese real estate giant Country Garden fell to a new record high on Monday, while its overseas bonds also came under pressure after trading in its onshore securities was suspended as its debt problems worsened.

Markets remain nervous as trouble at China’s largest private real estate developer could have a chilling effect on homebuyers and financial institutions, further dampening the prospect of a near-term recovery in the sector and broader economy.

The real estate sector is a mainstay of the Chinese economy, and it has already seen declining sales, tight liquidity and a series of developer defaults since late 2021.

Country Garden shares fell more than 15% to HK$0.83 in morning trade, pulling down the mainland Hang Seng Real Estate Index, which fell 4.6%. The stock has lost nearly 50% so far this month.

Country Garden’s overseas bonds also eased, with a few trading at the lower end of 6 cents on the dollar. The January 2031 bond was trading at 6.071 cents as of 0228 GMT, according to data from Duration Finance.

In separate filings over the weekend, the company said it would suspend trading on 11 of its internal bonds starting Monday, with a resumption of trading to be determined at a later date.

The move followed reports on Friday that the company was heading toward a debt restructuring, after it defaulted on two dollar bonds due Aug. 6 totaling $22.5 million.

Once considered a more financially sound developer, Country Garden’s woes have added to spillover concerns across a property market already grappling with weak buyer demand.

State-owned China Jinmao said in a statement on Sunday that it expects to post an 80% drop in net profit in the first half of this year, due to lower gross margin on some projects and lower revenue from land development. Its Hong Kong-listed shares fell more than 7% on Monday.

(Reporting by Claire Gem; Editing by Jacqueline Wong and Shri Navaratnam)

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