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Markets


CHINA BOOSTS DEVELOPER FUNDING BY RESUMING LOCAL SHARE SALES

 * Securities regulator unveils five measures for property firms
 * Funding moves add to support for embattled real estate sector

By
Bloomberg News
November 28, 2022 at 11:59 AM GMTUpdated onNovember 28, 2022 at 1:33 PM GMT


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IN THIS ARTICLE

CNY
China Renminbi Spot
7.0495
CNY
-0.0429-0.6049%
CIH
CHINA INDEX-ADR
0.82
USD
-0.03-3.26%
3988
BANK OF CHINA-H
2.73
HKD
-0.04-1.44%
601398
IND & COMM BK-A
4.25
CNY
-0.05-1.16%
1233153D
CHINA BOND INSURANCE CO LTD
Private Company
Open

China will end one of its major equity fundraising bans on property developers
to ease the real estate downturn, allowing listed builders to sell local shares
for debt repayment and acquisitions. 

Some multi-year restrictions on stock sales by developers will be lifted Monday
to support the “stable and healthy” development of the sector, the China
Securities Regulatory Commission said in a statement introducing five new
measures. 




China is stepping up support for the embattled property industry, which has seen
a wave of defaults and plunging sales following a crackdown on borrowing from
Beijing. Regulators issued a 16-point plan earlier this month to boost the real
estate market, while several state-owned banks pledged at least 1.28 trillion
yuan ($178 billion) in funding for developers.

“The support on equity fundraising is all round” as it covers mergers and stock
sales, said Liu Shui, research director at China Index Holdings. “It’ll likely
speed up consolidation in the property sector.” 

With the latest measures Monday, the regulator allowed developers to sell stock
to buy property assets, which had been restricted since 2015 when policy makers
sought to prevent real estate firms from amassing cash to buy up land. Officials
also opened the door for share listings following mergers, if the deal target is
also a listed property firm. 




Listed developers will be allowed to resume private placements in China to raise
funds for a wide range of purposes, from completing housing projects and
building affordable housing to replenishing working capital or repaying debt.




Together with a program announced in August to facilitate local bond sales with
state guarantees and recent financing support pledged by mega banks, China has
fully revived its so-called “three arrows” program, which the People’s Bank of
China first introduced in late 2018 to help these private companies raise
capital, said Yan Yuejin, research director at E-house China Research and
Development Institute.  

Read more on property easing:

ICBC Leads China Banks to Offer $179 Billion to Builders (3)

China Lets Builders Use Pre-Sale Funds to Ease Cash Crunch (1)

China Plans Property Rescue in Latest Surprise Policy Shift (1)

In a separate move, the Chinese state-backed company at the center of a key
program to guarantee local bond sales from cash-strapped developers is loosening
requirements to access funding, Bloomberg News reported earlier, citing people
familiar with the matter.




China Bond Insurance Co. will now accept collateral from builders beyond their
core assets, according to the people, who requested anonymity talking about
private matters. It’s also lifting the acceptable loan-to-value ratio to above
50% in some cases, the people said. In addition, the firm will consider
collateral from less developed regions, they said.

Construction companies, also under liquidity pressure given developers often owe
them short-term debt, will enjoy the same easing, according to the Monday
statement.  

— With assistance by Charlie Zhu and Emma Dong

(Updates with analyst comment from fourth paragraph, more details throughout)




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IN THIS ARTICLE

CNY
China Renminbi Spot
7.0495
CNY
-0.0429-0.6049%
CIH
CHINA INDEX-ADR
0.82
USD
-0.03-3.26%
3988
BANK OF CHINA-H
2.73
HKD
-0.04-1.44%
601398
IND & COMM BK-A
4.25
CNY
-0.05-1.16%
1233153D
CHINA BOND INSURANCE CO LTD
Private Company
Open
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