Chinese property tycoons win nearly $4 billion after Beijing surprises market with massive support
Wu Yajun (left), co-founder and chairman of Longfor Group Holdings, and Yang Huiyan, co-chairman of Country Garden.
Courtesy of Longfor; courtesy of Yang Huiyan
JTwo of China’s richest female real estate moguls, billionaires Wu Yajun and Yang Huiyan– saw his net worth jump $3.6 billion in just hours, after regulators around the country took a surprising turn and unveiled a comprehensive package of measures to support the struggling real estate sector.
To ensure the “stable and healthy development” of the real estate market, the authorities, including the country’s central bank, the People’s Bank of China, as well as the China Banking and Insurance Regulatory Commission (CBIRC), issued a document on Friday in 16 points. which included measures to boost lending and liquidity, according to several media reports.
Screenshots of the document are also available online, showing that regulators encouraged banks to meet developers’ “reasonable” funding needs with good corporate governance, allow debt repayments to be extended until to one year and deal with private and public real estate companies. On an equal footing.
“We view this as the most crucial pivot since Beijing dramatically tightened funding for the real estate sector,” Nomura economists led by Lu Ting wrote in a research note on Monday. “So those cash-strapped developers (especially the private ones), construction companies, mortgage borrowers and other concerned stakeholders can now breathe a sigh of relief.”
Shares of several major property companies soared in response, with Hong Kong-listed billionaire Yang Huiyan’s Country Garden jumping 40.6% midday on Monday, and fellow billionaire Wu Yajun’s Longfor Group, also listed in Hong Kong, which jumped 22.8%. Yang’s subsequent $2.4 billion increase in wealth and Wu’s $1.2 billion put the two tycoons among the top five gainers in the world. Forbes list of billionaires in real time for the same day.
Admittedly, Yang’s Country Garden and Wu’s Longfor Group have also been battered by the Chinese crackdown on soaring property prices and aggressive corporate borrowing, although the companies are seen as in stronger financial health than the failing developers. such as Shimao Group, Sunac China Holdings and China Evergrande Group.
Country Garden, for example, saw its net profit plunge 96% to $612 million in the first half of this year. Property sales in China have been falling for 14 yearse consecutive month in September as homebuyer confidence plummets amid the relentless crackdown.
Shen Meng, managing director of Beijing-based investment bank Chanson & Co., warns that the 16-point plan is by no means an industry-wide bailout. “The policies are intended to prevent large-scale defaults and systematic financial risks when many developers will face debt repayments coming due next year,” he says. “Another objective of these policies is to ensure delivery of pre-sold but stalled construction projects.”
Chinese developers collectively have at least $55 billion in bonds due over the next two years, but face weaker sales and limited refinancing options, Moody’s Investors Service wrote in a research note dated 27 october. Cash-strapped companies have suspended construction of pre-sold housing projects, sparking rare public protests and mortgage boycotts across the country.
But with authorities holding back from bailing out more companies, troubled property companies such as Evergrande are unlikely to experience a reversal of fortunes, according to Shen. The company’s troubled billionaire founder Hui Ka Yan became the symbol of magnates who borrowed at all levels to finance their expansion. Hui, once Asia’s richest person, has a net worth of just $2.9 billion, down from a 2017 high of $42.5 billion, as society struggling to restructure its north of $300 billion in total liabilities.