China Real Estate Shares, Bonds Fall on CIFI Default Fears

Shares and bonds in the Chinese real estate sector slipped on Wednesday after reports that a company headed by CIFI Holdings (Group) Co. Ltd. missed a debt payment, raising concerns for default by the Shanghai-based developer.

The Hang Seng Mainland Properties index was down 6.3%, while CIFI’s stock dropped as much as 32.2% to hit a record low following the news.

CIFI Default Concerns

The selloff occurred after a report from a US credit intelligence provider claimed that Tianjin Xingzhou Real Estate Development Co., a project entity led by CIFI, failed to pay a particular non-standard debt on time.

Citing unnamed sources, a credit markets data provider later reported that the Chinese developer was working on extending its deadline on a trust repayment that was due Tuesday.

The decline in the shares also came after CIFI Chairman Lin Zhong’s expectations of facing liquidity pressures that they had not seen before. Zhong’s forecast resulted in wild sell-offs in the real estate segment.

Shanghai-listed bonds issued by CIFI Holdings, Sunac Real Estate Group Co. Ltd., and Gemdale Corp. posted the most losses as well. Trading in a CIFI bond was later paused due to unusual fluctuations, according to the Shanghai Stock Exchange (SSE).

CIFI was one of the few developers allowed by Beijing to sell new bonds as the liquidity crisis in China’s real estate business weakened further in 2021, and the company is known for being a pretty strong performer within the sector.

Thus, analysts believed any defaults by CIFI would be significantly detrimental to the already struggling sentiment in the country’s property market.

CIFI has not provided a statement on the matter. However, Zhong said survival is now their priority, as real estate sales in China remained slow amid the pandemic, a sluggish economy, and a mortgage boycott.

In August, China’s difficulties in the property market became more challenging as home prices, sales, and investment all tumbled, further weighing on the faltering economy. Several major Chinese real estate developers have defaulted on bonds.