By Clarence Leong
Shares of Chinese property developers continued to slide Monday as worries mounted that China Evergrande Group is moving closer to a default, signaling the potential for a wider contagion in the sector.
The Hang Seng Mainland Properties Index plunged more than 6.0% on Monday morning, taking year-to-date losses to 33%. Evergrande /zigman2/quotes/208605330/delayed HK:3333 -3.91% fell 17% at one point, and was last down 14%, while Sunac China Holdings Ltd. /zigman2/quotes/206127839/delayed HK:1918 +0.63% slid 11% and Guangzhou R&F Properties Co. /zigman2/quotes/200033596/delayed HK:2777 -0.19% fell 6%. Property-management companies also tracked lower, with Country Garden Services Holdings Co. /zigman2/quotes/201681083/delayed HK:2007 +0.78% retreating 6%.
The selloff has been fueled slowing sales growth and Beijing’s tight policy on the sector, which hasn’t shown any sign of letting up. Worsening liquidity conditions at Evergrande and other developers who have borrowed heavily have led to downgrades by rating firms.
Evergrande, China’s largest junk-bond issuer, said last week that it had hired financial advisers, moving closer to a potential debt restructuring.
Efforts by the Chinese central bank to calm market jitters seem to have done little to halt the sharp downturn among developers. It pumped 190 billion yuan ($29.38 billion) of funds into markets on a net basis over Friday and Saturday via reverse-repo operations, according to data provider Wind.
The property sector’s losses have dragged the wider Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.31% lower. It fell as much as 4.2% and was last 3.5% lower at 24034.11, on track for its biggest one-day percentage decline since late July.
Write to Clarence Leong at firstname.lastname@example.org