2024-04-11 03:50:00
S&P Global Ratings on Wednesday downgraded Vanke’s credit rating to the highest level below investment grade and gave it a negative outlook. China’s real estate market slump shows no signs of abating.
Updated April 11, 2024 11:50 CST
China’s housing market slump shows no signs of abating, and the pain is spreading.
Real estate developer China Vanke, whose largest shareholder is a state-owned subway operator, has avoided the worst of the industry’s downturn over the past two years, gaining ground on China Evergrande When giants such as China Evergrande (China Evergrande) and Country Garden (Country Garden) default on their debts, Vanke remains solvent.
But now Vanke is facing increasing pressure.
S&P Global Ratings (S&P…
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China’s housing market slump shows no signs of abating, and the pain is spreading.
Real estate developer China Vanke, whose largest shareholder is a state-owned subway operator, has avoided the worst of the industry’s downturn over the past two years, gaining ground on China Evergrande When giants such as China Evergrande (China Evergrande) and Country Garden (Country Garden) default on their debts, Vanke remains solvent.
But now Vanke is facing increasing pressure.
S&P Global Ratings downgraded the company’s credit rating by three notches on Wednesday, to BB+, the highest level below investment grade, and gave it a negative outlook. S&P noted that the company is highly leveraged, faces the possibility of further sales declines, and that planned asset sales may encounter obstacles.
The move heightened selling pressure on Vanke’s shares and bonds:
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The company’s dollar-denominated bonds due in May 2025 fell about 3% of their face value on Wednesday, according to Tradeweb data. The bond has lost about 13 cents this year and currently trades at 68% of face value.
Vanke’s Hong Kong-listed shares fell 4.3%, consolidating a 42% decline since the beginning of the year.
Daniel Tan, portfolio manager at Grasshopper Asset Management, said in a research report last month that Vanke is widely seen as a bellwether for government support for the real estate industry. But investors appear unwilling to bet on government officials coming to the rescue: Vanke has lost about $40 billion in market value since the end of 2019.
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