Chinese Real Estate Stocks hit by Weak Data, $1.1 bln Evergrande Payout

By Ambar Warrick

Investing.com -- Chinese real estate stocks slumped on Monday after data showed a drop in monthly home sales, while beleaguered developer China Evergrande Group (OTC:EGRNY) flagged a 7.3 billion yuan ($1.1 billion) payout for one of its units.

Blue-chip real estate developers including Shunfa Hengye Corp (SZ:000631), Shanghai Construction Group Co Ltd (SS:600170), Poly Real Estate Group Co Ltd (SS:600048) and Gemdale Corp (SS:600383) sank between 3.8% to 5% in morning trade on Monday.

The broader Chinese blue-chip index Shanghai Shenzhen CSI 300 rose 0.6%.

Data on Monday showed that China’s home prices and sales volume fell in July from a month earlier, amid growing uncertainty over the solvency of major developers.

Evergrande said in a statement to the Hong Kong Stock Exchange that its unit, Evergrande Group (Nanchang) Co Ltd, was ordered to pay $1.1 billion to a guarantor. The unit had pledged about 1.28 billion shares as collateral to the guarantor, which was not named in the statement.

The move comes as the latest blow to the property developer, which is struggling to revamp its debt as it faces a default. Reports suggest that Evergrande will unveil a debt revamp plan by November, which could also offer creditors holdings in its overseas-listed units.

Evergrande is at the heart of an ongoing crisis in China’s real estate market, which faces a string of defaults due to a cash crunch among developers. The space also faces threats from homebuyers to stop paying their mortgages.

In response, the Chinese government has outlined the release of $44 billion in funds to help support debt-saddled developers, Reuters reported last week.

A potential crash in China’s real estate market, which accounts for a quarter of the economy, could cause contagion on a global scale, given that several major lenders are heavily exposed to the space.