Chinese Property Bonds, Shares Jump On Funding Support Plan

(Bloomberg) -- Chinese developers’ bonds and shares gained after people familiar with the matter said regulators are drafting a list of 50 developers eligible for a range of financing, the latest move by Beijing to support the embattled property sector.

Longfor Group Holdings Ltd.’s 3.85% note due 2032 rose 4.2 cents Monday to 42 cents, while Seazen Group Ltd.’s 4.8% bond due 2024 climbed 3.4 cents to 35.4 cents, with both poised for their biggest gains in almost two weeks. Longfor’s American depositary receipts rose 6.2% on Monday to their highest level since Oct. 2. China Vanke Co.’s 3.5% notes due 2029 rose another 0.4 cents to 58.8 cents on the dollar on Tuesday morning after climbing 5.9 cents on the dollar Monday. 

China Vanke, Seazen and Longfor are among companies that have been named in a draft of the so-called white list for funding, the people said, asking not to be named because the matter is private. 

The list, which includes both private and state-owned developers, is intended to guide financial institutions as they weigh support for the industry via bank loans, debt and equity financing, the people said. It couldn’t be determined which other developers were included on the draft list.

The move may help boost confidence toward some developers but is unlikely to mark the end for developer defaults, according to JPMorgan Chase & Co. analyst Karl Chan.

“We do not think a whitelist alone can prevent a company from defaulting on bonds,” Chan wrote in a note. “Directionally this would be positive as it should enhance confidence from both homebuyers and banks, but if property sales of a non-SOE deteriorate substantially, we believe most banks may still be reluctant to extend support, as a whitelist may likely only serve as a ‘reference.’” 

Chan cited Country Garden, which received financing support from authorities and banks but still failed to avoid a default.

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