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Evergrande crisis
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Developers’ shares rise on news of China’s US$12 billion bailout fund for beleaguered sector

  • The Hang Seng Mainland Properties Index rose by as much as 5.5 per cent in the morning session on Monday in Hong Kong
  • The size of the fund could be as much as 80 billion yuan (US$11.8 billion), Reuters says

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A construction site in Beijing. Other banks will follow suit if the pilot scheme works well, aiming to raise the fund up to 300 billion yuan. Photo: Reuters
Pearl Liu

The shares of Chinese property developers rose in Hong Kong on Monday on media reports that China’s State Council, the country’s cabinet, was stepping up efforts to bail out the sector with a fund that could be amount to as much as US$12 billion.

The Hang Seng Mainland Properties Index rose by as much as 5.5 per cent in the morning session. It had plunged by 30 per cent in the past month.

The rally came after the State Council approved a plan to set up a fund to support distressed real estate firms, distressed debt media REDD said citing people familiar with the matter.

The size of the fund could be as much as 80 billion yuan (US$11.8 billion) and will be used to buy unfinished projects and complete construction, before they are rented out to individuals as part of a government drive to boost rental housing, Reuters reported.

A Country Garden development in Shanghai. China’s biggest home seller saw its shares soar 4.77 per cent on Monday. Photo: Bloomberg
A Country Garden development in Shanghai. China’s biggest home seller saw its shares soar 4.77 per cent on Monday. Photo: Bloomberg

“If these measures are realised in the near future, they will allow more developers to avoid defaults, and will also help to improve market sentiment as well as developers’ sales,” said Raymond Cheng, managing director of CGS-CIMB Securities.

China’s property sector has been in a tailspin since the People’s Bank of China (PBOC) enforced its so-called three red lines on developers’ debts in September 2020. The bailout fund will be supported by China Construction Bank and the PBOC, Reuters said. Other banks will follow suit if the pilot scheme works well, aiming to raise the fund up to 300 billion yuan.
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