“Even though the programme may not actually help developers that much, it’s the message from the central government, showing its determination to stabilize the sector and the economy, that is boosting sentiment,” said Alvin Cheung, associate director of Prudential Brokerage in Hong Kong.
The move comes as cash-strapped property developers struggle to tap sources of funding to finish projects and pay suppliers. Several developers have defaulted on offshore debt obligations in the past year. More recently, investors have been fretting about the crisis deepening as developers widely believed to have had government backing also missed payments, such as CIFI and Greenland Holdings Corp Ltd.
“We think this is a big step to help ease liquidity for top private developers after recent defaults,” said Jefferies analyst Shujin Chen in a client note.Developers’ offshore U.S. dollar bonds also rebounded. A Seazen 2026 bond was trading at 14.35 cents on the dollar on Wednesday, showed data from Duration Finance, more than 3 cents higher than a day earlier.
Nomura said benefits from the expanded program are unlikely to be sufficient to resolve developers’ financial woes as prolonged contraction in new home sales may reduce funding sources this year by 3.3 trillion yuan.The property market continued its slump in October, with private data showing home prices and sales falling, indicating lacklustre sentiment and a bleak outlook amid strict COVID-19 curbs that have rattled consumer confidence.
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