China’s Kaisa Group halts trading amid property market jitters

Chinese developer Kaisa Group has halted the trading of its shares in Hong Kong amid growing concerns over the company’s cash flow and China’s key property sector.

Kaisa’s woes come as a liquidity crisis at one of the nation’s biggest property developers Evergrande Group threw a spotlight on the industry in recent months, following a state crackdown that has rattled investors and increased fears of a wider economic fallout.

The trading halt on Friday came amid Chinese media reports that wealth management products related to Kaisa had not been repaid when due, and that Chief Executive Kwok Ying-shing admitted the company was facing “unprecedented pressure on its liquidity”.

A brief notice to the Hong Kong stock exchange on Friday offered no reason for the suspension.

Ratings agencies Fitch and S&P last week downgraded Kaisa, citing refinancing risks.

Fitch said the downgrade was due to Kaisa’s “limited funding access and uncertainty over the refinancing of a significant amount of US-dollar bond maturities and coupon payment.”

“Kaisa could likely be another Evergrande,” said Raymond Cheng, head of China research at CGS-CIMB Securities, adding that the companies woes had intensified market concerns over developers’ liquidity conditions.

Hong Kong-listed shares of Kaisa, which has a market value of about $1bn, plunged more than 15 percent on Thursday to an all-time low.

In early trade in Hong Kong, a sub-index tracking the mainland property sector fell more than 2 percent, deepening its losses in the past two weeks to nearly 20 percent.

Evergrande shares fell 1.7 percent. The company’s 11.5 percent October 2022 bond fell more than 10 percent to yield above 300 percent, according to Duration Finance, leading sharp falls across developers’ bonds.

Troubles in China’s property sector are weighing on authorities’ resolve to forge ahead with reforms to rein in excessive debt.

Evergrande, which is grappling with more than $300bn in liabilities, plunged into crisis after Beijing began clamping down on the country’s colossal property sector.

State media has recently hinted at a rolling back of some regulations, reporting that local banks had begun easing some credit controls on homebuyers and developers on orders from the central bank.

Evergrande on Saturday faces a key deadline with an $82.5m coupon payment coming due.

Debt crisis

As the Shenzhen-based group works to shed assets, e-mobility firm Bedeo said on Thursday that it had acquired Protean Electric from a subsidiary of Evergrande New Energy Vehicle Group.

Chinese authorities have urged Evergrande billionaire founder Xu Jiayin, also known as Hui Ka Yan, to use his personal fortune to alleviate the company’s debt crisis, according to reports.

Bloomberg reported that his luxury assets alone — including a 60-metre (196-foot) yacht, business jets and houses under his name — have an estimated value of $485m, which could help cover the bond coupons that are yet to come due or have grace periods ending this year.