Positive signals appear Many measures by housing enterprises have boosted confidence in the bond market

In the face of the decline in domestic and foreign bond prices, housing enterprises have actively taken measures to boost market confidence. In terms of overseas bonds, there has been a wave of repurchases in the overseas bond market of housing enterprises. Agency statistics show that since the second half of 2021, 18 housing enterprises have successively implemented foreign debt repurchases, with more than 100 repurchases. In terms of domestic bonds, some real estate enterprises have adjusted the appropriateness management arrangements for bond investors in accordance with the relevant rules of the Shanghai and Shenzhen Stock Exchanges to safeguard the rights and interests of bond investors.

Industry insiders said that under the continuous regulation of regulatory policies, most housing enterprises will have the ability to make statements more standardized, financially more stable, and more sustainable in operation in the future, so as to achieve the stable and healthy development of the real estate industry.

Actively repurchase overseas bonds

According to Kerry research data, since the issuance of overseas DOLLAR bonds by housing enterprises in 2017, overseas bond issuance has gradually become an important financing method for housing enterprises. In 2019, 100 housing enterprises reached a peak in overseas bond issuance, with a financing scale of about 505.2 billion yuan, accounting for 64% of the total bond issuance. In 2020, the scale of overseas bond issuance and financing of housing enterprises will be about 399.8 billion yuan, accounting for 47% of the total scale of bond issuance. In the first nine months of 2021, the scale of overseas bond issuance by housing enterprises was about 237.9 billion yuan, accounting for 44% of the total scale of bond issuance. The scale of overseas bond issuance has been further tightened.

Since the issuance period of foreign bonds is mainly 1-5 years, and in recent years, the maturity of foreign debt of housing enterprises has increased sharply, and the US dollar bonds due in 2021, 2022 and 2023 have reached more than 300 billion yuan. Among them, the highest in 2022, the scale reached 375.5 billion yuan.

In this context, there has been a wave of repurchases in the overseas bond market of housing enterprises. According to incomplete statistics from Kerry Research, since the second half of 2021, 18 housing companies have successively implemented foreign debt repurchases, with more than 100 repurchases. From the perspective of redemption amount, the cumulative amount of overseas bonds and notes repurchased by real estate enterprises totaled US$1.56 billion, accounting for 4.07% of the initial issuance amount.

On the one hand, the intensive bond repurchase action of housing enterprises is mainly to carry out debt replacement and alleviate the debt repayment pressure in the short term. Kerry Research said that nearly 60% of the bond maturity time involved in the repurchase amount is concentrated in the fourth quarter of 2021 and 2022, such as Zhongliang Holdings carried out 25 redemption actions of overseas bonds, a total of 129 million yuan of foreign bonds due in the fourth quarter of 2021 and 2022, and it said that it will still actively increase bond repurchases in the future. Jiayuan International Holdings redeemed about RMB609 million of overseas senior notes in July-August, covering bonds maturing 2022-2024 with bond interest rates of 11.00% to 13.75%, while it issued three foreign bonds totaling RMB330 million in May-September 2021 with bond interest rates of 7.00% to 11.00%, and the cost of debt replacement has decreased.

On the other hand, it is mainly to boost market confidence. The maturity of the redemption bond also covers 2023 to 2026, which is a large range. From the perspective of the single amount of bond redemption, the single early redemption amount is generally between $1 million and $8 million, which is relatively small and shows the characteristics of "high frequency and low amount". The aim is to stabilize the prices of the bonds and boost market confidence.

Adjust the domestic bond trading mechanism

In terms of domestic bonds, some real estate enterprises have adjusted the appropriateness management arrangements for bond investors in accordance with the relevant rules of the Shanghai and Shenzhen Stock Exchanges to safeguard the rights and interests of bond investors.

In March 2019, the Shanghai and Shenzhen Stock Exchanges issued the Notice on Matters Related to the Adjustment of the Trading Methods During the Listing period of Bonds, which requires that if corporate bonds and corporate bonds are publicly issued and listed on the Shanghai Stock Exchange, and the bidding, quotation, inquiry and agreement trading methods are adopted at the same time when listing, if the credit rating of the bonds during the existence period is adjusted to AA grade (exclusive) or other circumstances determined by the firm to protect the legitimate rights and interests of investors, the trading method shall be adjusted to only quotation, inquiry and agreement transaction methods.

On October 11 this year, Fantasia Holdings issued an announcement on the adjustment of credit rating, and CCXCI downgraded the credit rating of the company's main body. After this rating adjustment, the credit rating of the company's main body is A, the rating outlook is "negative", "18 fantasy years", "19 fantasy years", "19 tricks 02", "20 tricks 01" and "20 pattern 02" the debt credit rating is A, and the credit ratings of the above entities and debts are included in the watch list of possible downgrades. Subsequently, according to the requirements of the Notice on Matters Related to the Adjustment of the Trading Method During the Listing period of Bonds, the trading methods of "18 Fantasia", "19 Fantasia", "19 Fantasia 02", "20 Citation 01" and "20 Citation 02" were adjusted from October 11, and only quotation, inquiry and agreement trading were adopted on the integrated electronic platform of fixed income securities.

In May 2021, the Shanghai and Shenzhen Stock Exchanges issued the Measures for the Administration of the Appropriateness of Investors in the Exchange Bond Market (2021 Draft for Comment) which further clarified that when bonds listed and traded on the exchange or listed for transfer occur "greater negative fluctuations in the price of corporate credit bonds issued by the issuer", the issuer, trustee manager or institution with equivalent responsibilities shall promptly issue an announcement to remind the investment risks, and from the date of disclosure of the situation, Only institutional investors among the professional investors specified in these Measures may purchase the bonds.

On October 8 this year, Sunshine City issued an announcement that, in accordance with the Administrative Measures for the Issuance and Trading of Corporate Bonds, the Measures for the Administration of the Appropriateness of Investors in the Bond Market of the Shenzhen Stock Exchange and other relevant provisions, the Company applied to adjust its investor appropriateness management arrangements for the corporate bonds "20 Yangcheng 01", "20 Yangcheng 02", "20 Yangcheng 03", "20 Yangcheng 04", "21 Yangcheng 01" and "21 Yangcheng 02" issued by Sunshine City and still in existence from October 11, 2021. That is, after the adjustment, the above bonds can only be purchased by institutional investors among professional investors, and non-professional institutional investors who originally held bonds can choose to hold maturity or sell bonds.

It is worth noting that Sunshine City did not suspend any platform quotations, but only adjusted the scope of investors, which has no impact on qualified institutional investors, that is, qualified institutional investors can still trade through auction trading methods and agreement block trading methods. Some bond practitioners said that the main purpose of this move should be to avoid small abnormal transactions in the auction system every day, manipulate prices and disturb market sentiment.

China Securities News has previously reported that the current real estate bonds are facing liquidity pressure, even if the amount of selling and trading will cause greater disturbance to the closing price and valuation, some institutions use the difference between domestic and foreign trading mechanisms to "short" to make money. One is to trigger panic by releasing negative news, rumors or creating price changes; the other is that overseas investment banks leak information on structured financing orders and manipulate prices with insider information.

A warming signal appears

From the perspective of short-term market trends, the real estate industry is facing problems such as tightening sales and increasing short-term debt repayment pressure, but a number of brokerage research reports believe that the real estate market may have bottomed out, and there are currently some warming signals.

Anxin Securities Research Report believes that under the continuous standardization of regulatory policies, most housing enterprises have the ability to make statements more standardized, financially more stable, and more sustainable in operation in the future, so as to achieve the stable and healthy development of the real estate industry.

Ping An Securities Research Report believes that since September, the central bank has repeatedly spoken out to maintain the stable and healthy development of the real estate market, clearly "guiding major banks to accurately grasp and implement the prudent management system of real estate finance", and many places have hidden positive signals of housing loans, and the pressure on the capital side of housing enterprises may be eased. The short-term industry pain period is expected to accelerate the survival of the fittest of housing enterprises, the future "surviving" housing enterprises will be more stable in operation and finance, and housing enterprises with brand, management, financing and other advantages are expected to enjoy a higher level of profit margins.

Source: China Securities News