Chinese property developers face potential expulsion from Stock Connect program due to falling market values

From South China Morning Post: 2024-06-26 19:30:09

Several Hong Kong-listed Chinese property developers risk losing mainland investor support as their market values dip below the threshold for inclusion in the Stock Connect program. Mainland buyers have driven a recent rebound in the sector, now threatened by potential expulsion from the cross-border investment scheme, impacting the Hang Seng Mainland Properties Index.

Due to falling market capitalization, Soho China, Shimao Group Holdings, Guangzhou R&F Properties, and other companies could be excluded from the Stock Connect as early as August, pending quarterly index rebalancing. Mainland funds are crucial for smaller property stocks in Hong Kong, which have been struggling amid liquidity stress and creditor demands for winding-up.

Market uncertainty looms over the Hong Kong-listed Chinese property sector, with almost half of the developers on the Hang Seng small-cap gauge facing potential expulsion from the Stock Connect program. Despite recent efforts by Beijing to support the industry, credit risks and liquidity stress continue to weigh on the market, further exacerbated by uncertainties around home prices and income expectations.

The property market outlook remains grim following a significant drop in home prices in May, which eroded gains from recent government stimulus measures. Creditors filing winding-up petitions against major developers like Shimao and Country Garden Holdings have added to the sector’s challenges, with growing concerns about debt restructuring and liquidation proceedings. Analysts warn that market recovery hinges on resident income and home price expectations.



Read more at South China Morning Post: Some Chinese property developers could be dropped from Stock Connect market access scheme