China property market roiled by default fears, Country Garden spooks

BEIJING — Two years after Evergrande’s debt troubles, worries about China’s real estate sector are coming to the forefront again.

Country Garden, one of the largest non-state-owned developers by sales, has reportedly missed two coupon payments on dollar bonds that were due Sunday. Citing the firm, Reuters said the bonds in question are notes due in February 2026 and August 2030.

Country Garden did not immediately respond to CNBC’s request for comment on the reports.

Meanwhile, Dalian Wanda saw its senior vice president Liu Haibo taken away by police after the company’s internal anti-corruption probe, Reuters reported Tuesday, citing a source familiar with the matter. Dalian Wanda did not immediately respond to a CNBC request for comment.

Hong Kong-listed shares of Country Garden closed more than 1.7% lower on Wednesday, after sharp declines earlier in the week.

“With China’s total home sales in 1H23 down year-on-year, falling home prices month-on-month across the past few months and faltering economic growth, another developer default (and an extremely large one, at that) is perhaps the last thing the Chinese authorities need right now,” according to Sandra Chow, co-head of Asia Pacific Research for CreditSights, which is owned by Fitch Ratings.

An investor relations representative for Country Garden didn’t deny media reports on the missed payments and didn’t clarify the company’s payment plans, Chow and a team said in a note late Tuesday.

The report noted negative market sentiment spillover to other non-state-owned developers such as Longfor. Shares of Longfor closed about 0.8% higher Wednesday in Hong Kong after trading more than 1% lower during the day.

“Overall homebuyer sentiment is likely to also suffer as a result,” the analysts said.

China’s massive real estate market has remained sluggish despite recent policy signals. In late July, its top leaders indicated a shift toward greater support for the real estate sector, paving the way for local governments to implement specific policies.

Uncertainties remain around the sensitive topic of home prices.

“We are concerned that as big cities lift local property restrictions, it will drain up demand in low tier cities, which account for 70% of national new home sales volume and are the real drivers of commodity demand and construction activity,” Nomura analysts said in an Aug. 4 report.

“We are also concerned that merely easing restrictions on existing home sales without lifting restrictions on home purchase may add supply and depress home prices,” the report said.

For the last several years, Chinese authorities have attempted to curb…