Caixin
Jul 12, 2022 04:25 PM
BUSINESS

Hang Seng Composite Index Dumps Six Chinese Property Firms

What’s new: The compiler of the Hang Seng Composite Index dropped six Chinese private property firms from the gauge on Monday, including China Evergrande Group and Sunac China Holdings Ltd., after the companies suspended trading for three months and failed to disclose their 2021 annual reports.

Evergrande’s property management and services arm has also been deleted from the index, along with Kaisa Group Holdings Ltd., China Aoyuan Group Ltd., and Shimao Property Holdings Ltd.

The context: The cash-strapped firms have either asked creditors to approve debt payment extension or simply defaulted, as they were among those hardest hit by a deleveraging campaign conducted by regulators since 2020.

Listed Chinese property firms have seen their market capitalization plunge over the past year, including some who have not been embroiled in bond repayment struggles. The Hong Kong stock of China’s largest developer by sales, Country Garden Holdings Co. Ltd., has dropped 38.9% over the past six months.

Although housing sales rebounded in June against the previous month, they were still way down on the prior year, and some analysts warned that the property firms’ debt distress might not be resolved any time soon.

“While the government has rolled out measures to support and restore confidence in the property sector, banks will continue to be selective about financing developers through loans, bonds and asset management products, while investors will likely remain cautious about investing in developers,” analysts at ratings agency Moody’s Investors Service wrote in a note last week.

Related: China’s Efforts to Prop Up Property Market Fall Short

Quick Takes are condensed versions of China-related stories for fast news you can use.

A previous version of this story misidentified the complier of the Hang Seng Composite Index. It is Hang Seng Indexes Co. Ltd.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)

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