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EQUITIES: Property Stocks Struggle, Despite 300b Yuan Funding Facility

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  • China’s housing market crisis, persists despite significant government intervention. Zhengzhou, an early epicenter of the property slump, has implemented measures like government loans for stalled developments, purchasing unsold units for affordable housing, and offering buyer incentives, yet home prices and sales continue to decline. Families, whose wealth has been heavily tied to real estate, are hoarding cash due to unemployment fears and a lack of confidence in price stability. Developers face liquidity challenges, with many defaults since 2021, while the oversupply of unsold homes and unbuilt presold units exacerbates the problem.
  • Several other Chinese cities, including Chongqing, Suzhou and Wuhan have begun utilizing the 300b yuan government funding facility to purchase unsold homes, according to Shanghai Securities News. Over 10,000 homes have been acquired so far as part of this initiative. The China Development Bank issued a 1.1b yuan loan to support SOEs in Suzhou to transform unsold properties into affordable housing for resale. Additionally, ICBC financed the purchase of 1,000 affordable rental units in Chongqing through a targeted loan program.
  • Elsewhere in company specific news, Kaisa Group is seeking Hong Kong court approval to hold a creditor vote on its $13b offshore debt restructuring plan, a crucial step toward avoiding liquidation. The plan includes issuing new dollar notes and convertible bonds, with over 75% creditor support already secured in key categories. Kaisa is also selling assets, including its Hong Kong headquarters, to raise cash as part of the restructuring effort.
  • Major China property benchmarks are lower today, the Mainland Property Index, is -1.25% and down 6.90% for the month, HS Property Index is 2.20% lower today, and down 6.25% for the month, while BBG China Property Gauge is 2.15% lower today and down 5.30% for the month.
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  • China’s housing market crisis, persists despite significant government intervention. Zhengzhou, an early epicenter of the property slump, has implemented measures like government loans for stalled developments, purchasing unsold units for affordable housing, and offering buyer incentives, yet home prices and sales continue to decline. Families, whose wealth has been heavily tied to real estate, are hoarding cash due to unemployment fears and a lack of confidence in price stability. Developers face liquidity challenges, with many defaults since 2021, while the oversupply of unsold homes and unbuilt presold units exacerbates the problem.
  • Several other Chinese cities, including Chongqing, Suzhou and Wuhan have begun utilizing the 300b yuan government funding facility to purchase unsold homes, according to Shanghai Securities News. Over 10,000 homes have been acquired so far as part of this initiative. The China Development Bank issued a 1.1b yuan loan to support SOEs in Suzhou to transform unsold properties into affordable housing for resale. Additionally, ICBC financed the purchase of 1,000 affordable rental units in Chongqing through a targeted loan program.
  • Elsewhere in company specific news, Kaisa Group is seeking Hong Kong court approval to hold a creditor vote on its $13b offshore debt restructuring plan, a crucial step toward avoiding liquidation. The plan includes issuing new dollar notes and convertible bonds, with over 75% creditor support already secured in key categories. Kaisa is also selling assets, including its Hong Kong headquarters, to raise cash as part of the restructuring effort.
  • Major China property benchmarks are lower today, the Mainland Property Index, is -1.25% and down 6.90% for the month, HS Property Index is 2.20% lower today, and down 6.25% for the month, while BBG China Property Gauge is 2.15% lower today and down 5.30% for the month.