Evergrande Sees Best Start to Year Since 2018 as Sales Surge

(Bloomberg) -- China Evergrande Group saw its sales off to the best start in three years, as the country's monetary easing policies drove up real estate demand.

One of China's largest developers recorded a 43% jump in January sales to 58.1 billion yuan ($9 billion), the largest monthly increase since 2018, according to Bloomberg calculations based on data released by the company. Average selling prices rose 1.4% from December, following a brief decline amid fears of a cash crunch that sent the property giant's onshore bonds to record lows.

The January sales is “one of the fastest among peers,” because of Evergrande's proactive sales strategy, CGS-CIMB Securities property analyst Raymond Cheng wrote in a note Thursday.

A loose monetary easing aimed at shoring up the Chinese economy amid the Covid-19 pandemic has spurred a rebound in prices in some Chinese cities, forcing the central bank to cap loans for the real estate sector in January for the first time. Authorities in Shanghai and Shenzhen have taken further steps this year to cool the local housing markets following a resurgence in prices.

A new round of property austerity measures and gradual normalization of monetary and fiscal policies may dent China's residential sales growth this year, Citic Securities Co.'s head of fixed-income research Ming Ming wrote in note Wednesday.

Evergrande, saddled with a debt pile of almost $120 billion last year, is targeting 750 billion yuan in contracted sales for 2021, 3.6% higher than 2020. The company is resorting to steep price cuts in the new year in an apparent bid to hit the sales target and tackle its debt problem, offering discounts of more than 20% on new apartments this month. In an unusual sales pitch last month, it briefly offered to fully reimburse buyers some of its retail properties if they pay in full upfront.

Part of Evergrande's pressure comes from new requirements imposed by China's regulator known as the “three red lines.” Developers must meet these metrics in order to increase their borrowing, and Evergrande's latest financial figures suggest it breached all three. Adhering to one may mean the company can increase its debt by 5% under the rules.

Shares of Evergrande fell 0.8% during Hong Kong trading, under-performing the benchmark Hang Seng Index. Its 8.75% dollar bond due 2025 rose 0.3 cent on the dollar to 82.5 cents as of 9:15 am in Hong Kong, according to prices compiled by Bloomberg.

The company's electric vehicle affiliate also surged as much as 17% to a fresh high in Hong Kong, after it released photos and video footage of its first batch of cars undergoing a winter test.

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With assistance from Bloomberg