Evergrande's last-gasp interest payment gives Chinese developer stocks and Asia bonds a lift
- Evergrande's surprise payment on a missed dollar bond coupon lifted regional property stocks and bonds on Friday.
- The Chinese developer's shares rose as much as 7.8%, before closing 4.2% higher.
- Hong Kong's property developer index rose 3.3%, notching its biggest weekly gain in a month.
A surprise interest payment from Evergrande has lifted Chinese property stocks and risk-sensitive assets including junk bonds on Friday, as the last-minute payment eased a period of uncertainty for investors.
The embattled developer wired $83.5 million to pay the interest on an offshore dollar bond on Thursday ahead of a closely-watched deadline that expires Saturday, state-backed media reported.
Evergrande's shares rose as much as 7.8% in Hong Kong on Friday, putting it on track for its first rise since late September when it had raised $1.5 billion by selling part of its stake in a Chinese lender. Its stock closed 4.2% higher on Friday.
Hong Kong's Hang Seng mainland property index rose 3.3%, closing up nearly 8.5% in a week, its biggest weekly gain in a month. The broader Hang Seng index gained 0.4%. The Shanghai Property Index has risen 4.7% in two days, which is the most in seven weeks, according to Bloomberg data.
Evergrande's dollar bonds jumped, with its April 2022 and 2023 notes rising more than 10% in price on Friday, the Guardian reported, citing data from Duration Finance.
Regional high-yield junk bonds rose in price too. In China, they rose as much as 3 cents on the dollar, Bloomberg reported, citing credit traders. That leaves them 4.5 cents higher this week - the biggest weekly gain since 2012.
Evergrande didn't provide an announcement about the implications of the payment, or what this means for the group's future.
But the company broke its silence on its payments after a deal to sell a $2.6 billion stake in a key unit to Hopson Development failed this week. In a Wednesday filing, the group said there has been "no material progress on sale of assets."
It also noted Evergrande "has a 30-day grace period to pay interest after the interest becomes due under its US dollar-denominated notes" and these grace periods "have not expired."
One explanation for Thursday's repayment is that Evergrande may not want to default after China's move to stabilize the property sector, according to Nomura. "As the property management deal has failed, they may want to buy more time to retain the flexibility to sell assets before they are locked up by creditors," Nomura said.
But the investment firm said it views an Evergrande default as "almost inevitable," and that it's better for the company to default earlier rather than later to prevent repayment of onshore debt using offshore assets.
Another property developer Kaisa, which is also being closely watched, has a bond interest payment due on Friday. That bond last traded at 35 cents on the dollar, according to the Financial Times.
Real estate companies in the region also reportedly got a boost from China pledging to support those buying homes for the first time with easier mortgage financing.
Seazen Group and Sunac China rose 8% in Hong Kong. China Vanke, the nation's third-biggest developer, gained 2.8% in Hong Kong, while its Shenzhen-listed shares rose 2.9%. The best performer, Tianjin Jinbin Development, jumped 10% in Shenzhen.