HONG KONG : News that big developer Country Garden was not able to make $22 million in bond payments is an alarm call for China's government that more private property companies are close to a tipping point if financial support doesn’t materialise soon.
Contagion fears in the market re-surfaced last month when four high-profile developers signalled liquidity stress amid slumping home sales nation-wide. Country Garden's missed payments have triggered a sell-off in shares and bonds across the sector and fears of more contagion, analysts at HSBC said in a research note.
In September alone, Country Garden has a 5.8 billion yuan onshore bond maturing and a 48 million yuan coupon due, as well as put options on a further 3.4 billion yuan of paper.The investment bank said Country Garden's home sales could slump more than 80 per cent in the rest of this year compared to the four-year average, as reports of financial distress scare away potential homebuyers.