Fed remarks about China property sector

Crossville TN

Description

Major Chinese property managers with unutilized listing proceeds such as China Resources Mixc Lifestyle Services Ltd. and Poly Property Services Co. could step up in acquiring their third-party peers to boost earnings in the coming years, particularly units from debt-laden developers, according to Bloomberg Intelligence analysts Patrick Wong and Yan Chi Wong. Investors’ concerns over Shimao Services Holdings Ltd.’s financial disclosures may slow its future business expansion, they said. Chinese developer Zhongliang Holdings Group Co. extended its exchange offer and consent solicitation to 4 p.m. London time May 16 from 4 p.m. London time May 10, according to statement to Hong Kong stock exchange. Fed Lists China’s Housing Market as Risk (8:57 a.m. HK) In its Financial Stability Report published late Monday, the Fed listed China’s housing market as one of the near-term risks to the US financial system, along with the Russia-Ukraine war and inflation. From the Fed: 1) Banks have direct exposure to developers amounting to more than half of their Tier 1 capital, and “substantial” indirect exposure from loans to other firms that are collateralized by real estate. 2) Banks are also exposed indirectly through wealth-management products sold to retail investors. 3) Local governments generate a significant portion of their revenues from land sales, and they too are highly leveraged. Local government debt, including off-balance-sheet financing vehicles, exceeded 70% of China’s GDP last year. But “if the property market fallout intensifies and leads to significant strains at Chinese banks that reduce bank lending and GDP growth, the transmission of stresses to the United States could be strong,” through channels from both the real economy and financial markets, the Fed said. The report specifically mentioned the year 2015 as an example, when China’s devaluation led to volatility spikes in global markets and a dollar rally. A-Living Target Cut 43% by CICC on Weaker Earnings Outlook (8:48 a.m. HK) CICC slashed A-Living Smart City Services Co.’s price target by 43%, citing lower earnings forecast as the dwindling property market weighs on the company’s value-added service demand and profit margins. Its parent Agile Group hasn’t bid for any new land since December and Agile’s contracted sales in the first quarter dropped 47% on year, which may add pressure on A-living, analysts including Yiyu Wang wrote in a note.