China Developer Slump Deepens to $55 Billion as Debt Woes Mount

(Bloomberg) — Chinese property stocks tumbled the most in nine months as concern over a possible China Evergrande Group liquidation added to fresh signs of stress across the industry.

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A Bloomberg Intelligence gauge of developer shares fell as much as 6.4% Monday, taking its loss in valuation this year to $55 billion. Evergrande, which scrapped key creditor meetings at the last minute and said it must revisit its restructuring plan, dived 25%. China Aoyuan Group Ltd. was the biggest drag on the gauge, slumping by a record 76% after shares resumed trading.

Sentiment has worsened dramatically in recent days as investors brace for years of pain from the ailing sector, with policy support failing to resolve liquidity woes. While developers are pinning their hopes on the upcoming Golden Week holiday period to revive home sales, a rapid cooling of a late-August rally in property shares shows any relief may be short lived.

Investors are confronting a seemingly endless stream of negative news. China Oceanwide Holdings Ltd. faces court-ordered liquidation as a Bermuda court issued a winding-up order against the firm. The nation’s regulator said it’s launched an inquiry into Ping An Real Estate Co. over an undisclosed overdue loan payment. Meanwhile, concerns linger over a potential default by Country Garden Holdings Co.

“This change in debt restructuring plan may further cloud the future of this debt-laden company,” said Willer Chen, senior research analyst at Forsyth Barr Asia Ltd., referring to Evergrande. “For the remaining surviving developers, the market is focusing more on their property sales recovery and policy support,” he added.

Chinese property junk dollar notes, most of which are in deeply distressed levels at below 15 cents, were largely unchanged on Monday.

Ping An Real Estate suffered the most, with its 2.75% note due 2024 falling 4.6 cents to 73.8 cents as of 11:30 am in Hong Kong, according to Bloomberg-compiled data. China’s high yield bond index, mainly composed of the country’s developers, dropped 0.25 cents last week, the first decline this month.

–With assistance from Jeanny Yu, Pearl Liu and Russell Ward.

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