Regulators ordered property developers to disclose their commercial paper issuance details every month. Hence, on Friday, July 16, China stocks fell.
The Shanghai Composite Index lost 0.29%, with a net change of $10.18. This sent the stocks to the bottom at $3,554.41 per share.
Likewise, the Shenzhen Component Index also declined 0.52%, with a net loss of $79.19. This sent the stocks below to $15,090.14 per share.
Meanwhile, the disclosure order is part of Beijing’s move. It wants to leash the growing debt in the property sector since the economy is starting to slow.
Chinese real estate developers are the major issuers in the commercial paper market. The market encountered new issues of $556 billion last year. This is 20% higher than 2019.
Commercial paper is commonly used in the property sector as a payable. This guarantees payment on a fixed future date for construction suppliers.
Within one year, some of these suppliers sell the paper with a small discount in the secondary market before the maturity date.
However, an analyst said that these commercial papers are not counted as interest-bearing debt.
In addition, property developers grew to use these papers to raise funds.
Due to this, Chinese authorities are pushing for greater control when it comes to growing late payments for these papers by some companies.
These firms include China Evergrande Group, the most indebted developer with an estimated $88 billion borrowings, China Fortune Land, and Sichuan Languang Development.
Moreover, Beijing is also looking to investigate the uncontrolled borrowing of several developers outside the usual financing networks like bank loans and bond issuance. This will be implemented to curb the nation’s financial risk since regulators want more transparency on developers’ purpose on using these commercial papers.
Asia Stocks Declined
As the Chinese stock market fell, Asia stocks also declined as the surging coronavirus cases restrained the region’s economic recovery.
In Japan, the Nikkei 225 decreased 0.90% with a net loss of $253.13. This sent the stocks below at $28,025.96 per share.
The broader Topix Index also sank 0.22%, with a net change of $4.35. This sent the stocks at the bottom at $1,935.26 per share.
Likewise, South Korea’s KOSPI tumbled 0.61% or 20.21 points which sent the stock to the ground at $3,266.01 per share.
Meanwhile, Hong Kong’s Hang Seng Index and Australia’s S&P/ASX 200 climbed 0.45% or 124.73 points to $28,121 and 0.01% or 0.40 points to $7,336.30, respectively.
Additionally, the MSCI All Countries Asia Pacific Index also gained 0.15% or 0.31 points to $205.95 per share on its latest data last July 15.