Major Chinese property developers faced substantial losses on Wednesday as government data revealed a further dip in house prices in December, coupled with sluggish economic growth.
Hong Kong-listed shares of prominent developers, including Sunac China Holdings Ltd (HK:1918), Longfor Properties Co Ltd (HK:0960), and China Resources Land Ltd (HK:1109), witnessed declines ranging from 4.5% to 9%. China Vanke’s (HK:2202) Hong Kong shares recorded a 3.2% fall, while Gemdale Corp’s (SS:600383) Shanghai shares saw a 1.5% decrease.
Struggling developers China Evergrande Group (HK:3333) and Country Garden Holdings Company Ltd (HK:2007), both grappling with debt restructuring, experienced drops between 3.5% and 6%. Country Garden recently acknowledged expectations of prolonged property market weakness in 2024 and enlisted auditor KPMG to aid in restructuring its offshore debt obligations.
Government data from the National Bureau of Statistics indicated a 0.4% decline in Chinese house prices in December, marking the most significant monthly drop since March 2023. This prolonged downward trend, persisting for 18 of the past 20 months, signals ongoing challenges for the property sector, compounded by a substantial sales decline since the onset of the 2020 COVID-19 pandemic.
The property market’s woes have contributed to a prolonged cash crunch for Chinese developers, with several major companies defaulting due to the sales downturn. Despite the Chinese government’s efforts to support local property developers through measures such as relaxed capital raise rules, easier access to funding, and looser lending conditions, the impact has been limited. Investors are now urging Beijing to implement more targeted fiscal measures.
The declining property market has been a significant obstacle to the Chinese economy over the past three years, given that the sector constitutes roughly a quarter of the overall gross domestic product.
On a broader scale, Chinese markets experienced declines on Wednesday, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes each down approximately 0.9%, while the Hang Seng index plummeted by 3.4%. The softer-than-expected GDP data for the fourth quarter added to negative sentiment, even though GDP slightly exceeded the government’s 5% target for 2023. The data portrayed a bleak outlook for China as it grapples with a sluggish post-COVID economic recovery.