Kaisa Property Holdings Evergrande

China Property Fears Resurge as Kaisa Group Misses on Interest Payment, Plunges 15%

Fresh concerns have been raised about China’s property sector as Kaisa Group has become the latest developer to miss a payment to investors.

The Shenzhen-based homebuilder Kaisa, which has guaranteed the wealth management product, said in a statement on Thursday it was facing unprecedented liquidity pressure due to a challenging property market and rating downgrades.

It comes as rival developer Evergrande Group is still reeling under the weight of more than $300bn (£222bn) of debt. The crisis at Evergrande has triggered fears that its potential collapse could send shockwaves through global markets.

Meanwhile, Evergrande has sold a UK-based asset as it faces another payment deadline on Saturday.

Trading in shares of Kaisa Group and three of its units was halted in Hong Kong on Friday, after one of its businesses missed a payment on a wealth management product.

Kaisa’s troubles come amid concerns about a broadening liquidity crisis in the Chinese property sector, with a string of offshore debt defaults, credit rating downgrades and sell-offs in the developers’ shares and bonds in recent weeks.

Friday’s filing to the Hong Kong stock exchange did not give a reason for the trading suspension.

Before the suspension, Kaisa, which has a market value of about $1bn, saw its shares hit a record low on Thursday after falling by 15%.

TradingView Chart
Kaisa Property Holdings, one-year technical performance chart.
Kaisa Follows Evergrande Costly Steps

The Shenzhen-based developer said on Thursday that it is facing unprecedented pressure on its finances due to a challenging property market and downgrades by rating agencies, which makes it more difficult for it to borrow money.

On Saturday, an Evergrande unit is due to make $82.5m of interest payments to investors, while next Wednesday a 30-day grace period expires for other interest payments owed by the embattled property developer.

Evergrande’s shares were suspended in Hong Kong for 17 days last month after the company requested a trading halt ahead of the announcement of a major transaction.

TradingView Chart
China Evergrande, one-year technical performance chart.

However, a plan to sell a large stake in its property services unit for $2.6bn fell through as it was unable to agree on the terms of the deal.

On Thursday, Evergrande’s vehicle manufacturing unit sold its UK-based electric motor making business Protean as it tries to raise funds to meet its obligations. Evergrande didn’t say how much it was paid for Protean, which it bought in 2019 for $58m.

Their total combined debt on China’s real estate sector is estimated to be more than $5tn, according to Japanese banking giant Nomura. That’s almost the size of Japan’s economy.