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A little over a week ago, Chinese property developer Kaisa Group Holdings Ltd’s share price saw a tremendous rise of over 20 percent. Many market participants thought that the group will not default on its payments thereby joining the long list of Chinese companies that are in deep hole on debt payments. (https://edition.cnn.com/2021/12/03/business/kaisa-china-developer-default-risk/index.html)
That was last week. Kaisa now says it has failed to secure approval for debt swap for its its offshore bonds due December. In other words, the company could default.
There have been wild swings in Chinese real estate stocks and bonds, and Kaisa is adding more uncertainty. According to experts, the Chinese property sector is in a liquidity squeeze, and with several companies, including one of the biggest companies, Evergrande, still groping for solutions, there could be more defaults shortly. (https://www.cnbc.com/2021/11/26/chinas-real-estate-uncertainties-persist-fueling-market-anxiety.html)
So far, several large estate developers in China have faced the squeeze, and their shares have dropped like there is no bottom. Kaisa is relatively a small player and if it faces problems, many smaller companies looking to get a lifeline from their creditors could face more problems.
After Evergrande’s debt crisis, several real estate companies joined the list of defaults. Rating agencies also downgraded real estate companies such as Fantasia Holdings and Sinic Holdings. (https://www.ft.com/content/1abd9d4b-8d94-4797-bdd7-bee0f960746a)
With the Chinese government not in a mood to rescue companies that have fallen on bad days, the real estate sector is facing its worst crisis in memory. Experts warn that if it lingers for long, it could affect even international sentiment.
Read more:
The real estate debt crisis in China:
https://www.cnbc.com/2021/10/05/china-property-default-risk-for-fantasia-sinic-amid-evergrande-crisis.html