China grants $34.5 billion to buy Bond Debts
China's National Association of Financial Market Institutional Investors (NAFMII) said it would expand its bond debt financing program to private companies including real estate developers, extending debt financing up to 250 billion yuan ($34.5 billion) from a previously unspecified amount.
China's real estate stocks and bonds jumped in Wednesday trading session as authorities announced a financial support package.
The Hang Seng Mainland Real Estate Index rose 4.3% on Wednesday and is up 27% so far this month.
Cifi Holdings rosed 28.6%, Seazen Group rosed 17.9% and Country Garden rosed nearly 14% in Hong Kong on Wednesday.
The stock market rally came after China's National Association of Financial Market Institutional Investors (NAFMII) said it would expand its bond funding program to private companies including real estate developers, extending debt financing up to 250 billion yuan ($34.5 billion) from a previously unspecified amount, according to a statement on its official website Tuesday night. The scale can be expanded further depending on the actual situation, added NAFMII.
In the bond market, some bonds increased in price by more than 20% and brought trading to a halt. Jinke's 1 billion yuan domestic bond with a yield of 6.3% jumped 74%, Longfor's 1.8 billion yuan bond with a yield of 4.44% rose 29.3% and the Country Garden's 2 billion yuan bond with a yield of 4.8% rose 29.1%.
The expansion of the NAFMII program will be made possible through the central bank providing capital support through discount facilities, conducted by nominated professional organizations, through “guarantees and credit enhancements, create credit risk-reducing warrants and buy bonds directly”, according to the NAFMII statement.
Late Wednesday afternoon, the state-owned China Bonds Issuer announced an application channel for private real estate developers to seek a credit boost from the country's first professional credit enhancer. One form asks real estate developers to state whether they previously extended or failed to repay the bond and collateral details.
According to analysts, the move could only benefit more for powerful real estate developers rather than those that need the money the most, while home sales will be a key factor for real estate developers' fundamentals.
China grants $34.5 billion to buy Bond Debts
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