Business

Private equity cuts assets in China as Evergrande hits stocks

Private equity groups are planning to cut their exposure to Chinese real estate due to concerns about the health of the sector following the default last week of indebted developer China Evergrande.

Coller Capital, a London-based private equity specialist, said in a report on Monday that nearly a third of groups exposed to China would reduce investment in the country’s property sector. in the next three years. None of the investors indicated they planned to increase their investment.

The report comes days after Evergrande, the world’s most indebted real estate group, was downgraded to “limited defaultFrom the ratings agency Fitch.

Investors have tried to evaluate how far is the spread? Evergrande’s default will spread after several rival developers missed offshore bond payments in recent months. The industry has been under heavy pressure over the past year after Beijing announced “three red linesDeveloper debt restriction policy.

Manishi Raychaudhuri, head of Asia-Pacific equity research at BNP Paribas Securities at BNP Paribas Securities, said: “Potential defaults and liquidity problems among major developers have been overwhelming. raised concerns about a system-wide contagion affecting the entire supply chain. .

The Coller report also indicates that more than a third of investors with Asian exposure outside of China plan to invest more in other parts of the region.

Signs that Evergrande’s default will disrupt the Chinese market increased on Monday, with the Hang Seng Mainland Properties index, which tracks China’s 10 biggest developers, down 3.6%.

Shares of Shimao Group, one of China’s biggest developers, fell as much as 13.8%, while Sunac China Holdings, another developer, dropped 7.9%.

Sunac was closely monitored after draft letter Local authorities warn that they are facing liquidity problems.

Fantasia Holdings, a mid-sized developer whose shares returned to trading on Monday after a two-week hiatus, fell as much as 9.4% before paring losses to trade sideways. Fantasia default on a $206 million bond in October.

The market sold off in stark contrast to last week, when initial reaction News of Evergrande missing a bond payment totaling $82.5 million was softened by signals that Beijing would provide policy support to the troubled sector.

But investors were disappointed on Friday, after Chinese economic policymakers declared that “assets are for living, not speculation”, repeating a mantra being used. to justify developer leverage restrictions.

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