Wednesday, January 26, 2022
International

China-listed firms divest property businesses amid crackdown

Evergrande Group

Tightened lending curbs in the real estate industry early this year has exacerbated financial troubles at some property developers, triggering sector-wide liquidity stress

China-listed companies are increasingly divesting real estate businesses amid stricter regulatory scrutiny of the industry, according to filings and state media, in a year dominated by headlines of financial woe at China Evergrande Group.

Tightened lending curbs in the real estate industry early this year has exacerbated financial troubles at some property developers, triggering sector-wide liquidity stress.

China Evergrande, one of the country’s biggest developers, has struggled to make payments on billions of dollars worth of bonds, while smaller peers have likewise missed payments or had their credit ratings downgraded.

Some Evergrande dollar notes were on pace for their biggest drops in months, ahead of the expiry of the grace period on a unit’s bond interest payments Monday. The declines also occurred as China’s high-yield dollar bond market weakened Friday. The company has paid multiple bond coupons the past two months near the end of their grace period.

On Thursday, liquor and meat producer Beijing Shunxin Agriculture Co Ltd said it planned to sell its entire stake in a money-losing property unit.

The announcement came two weeks after liquor product maker Hainan Yedao Group Co Ltd said it would sell its 40% stake in a property company to focus on core businesses and improve liquidity.

Dozens of China-listed companies, including Xiamen ITG Group Corp Ltd, Aoyuan Beauty Valley Technology Co and Zhangtian Financial Group Co Ltd have announced plans to dispose of property businesses so far this year, the state-run Securities Times reported.

Reflecting the real estate sector’s liquidity crunch, data from the China Trust Association showed outstanding investment from trust firms dropped below 2 trillion yuan ($313.66 billion) at the end of the third quarter, down 26% from a year earlier.

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