Chinese Real Estate Tycoons Gain Almost $4 Billion After Beijing Surprises Market With Sweeping Support
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Two of China’s richest female real estate tycoons—billionaires Wu Yajun and Yang Huiyan—saw their net worth gain a combined $3.6 billion in just a few hours, after the country’s regulators took a surprising turn and unveiled a comprehensive package of measures aimed at supporting the ailing property industry.
To ensure the “stable and healthy development” of the real estate market, authorities including the country’s central bank, the People’s Bank of China, as well as the China Banking and Insurance Regulatory Commission (CBIRC), issued on Friday a 16-point document that included steps to boost lending and liquidity, according to multiple media reports.
Screenshots of the document are also available online, showing that regulators encouraged banks to meet the “reasonable” financing needs of developers with sound corporate governance, allow extension of debt repayments by up to one year, and treat private and state-owned real estate companies on an equal footing.
“We view this as the most crucial pivot since Beijing significantly tightened financing of the property sector,” Nomura economists led by Lu Ting wrote in a research note on Monday. “Thus, those cash-strapped developers (especially private ones), construction companies, mortgage borrowers and other related stakeholders can now breathe a sigh of relief.”
Shares of several major real estate companies soared in response, with billionaire Yang Huiyan’s Hong Kong-listed Country Garden jumping 40.6% as of Monday noon, and fellow billionaire Wu Yajun’s Longfor Group, also listed in Hong Kong, surging 22.8%. Yang’s subsequent $2.4 billion increase in wealth and Wu’s $1.2 billion placed the two moguls among the five biggest gainers on the Forbes Real-Time Billionaires List for the same day.
To be sure, Yang’s Country Garden and Wu’s Longfor Group have also been battered by China’s crackdown on once skyrocketing housing prices and aggressive corporate borrowing, although the firms are considered to be of stronger financial health than defaulted developers such as Shimao Group, Sunac China Holdings and China Evergrande Group.
Country Garden, for example, saw its net profit plunge 96% to $612 million in the first half of this year. China’s property sales have declined for a 14th consecutive month in September, as homebuyer confidence slump amid the unrelenting crackdown.
Shen Meng, managing director at Beijing-based boutique investment bank Chanson & Co., cautions that the 16-point plan by no means amounts to a sector-wide bailout. “The policies are aimed at preventing mass-scale defaults and systematic financial risks when many developers face maturing debt payments next year,” he says. “Another focus of these policies is ensuring the delivery of pre-sold but stalled construction projects.”
China’s developers collectively have at least a combined $55 billion in bonds due over the next two years, but face weaker sales and limited refinancing options, Moody’s Investors Service wrote in an October 27 research note. Companies running out of money have suspended construction of pre-sold housing projects, causing rare public protests and mortgage boycotts across the country.
But as authorities refrain from bailing out more firms, beleaguered real estate companies, such as Evergrande, are unlikely to have a reversal of fortunes, according to Shen. The company’s troubled billionaire founder Hui Ka Yan has come to symbolize tycoons who have borrowed across the board to fund their expansion. Hui, once Asia’s richest person, now only has a net worth of $2.9 billion, down from a peak of $42.5 billion in 2017, as the company struggles to restructure its north of $300 billion in total liabilities.
