Bonds of Shimao climb on reports of regulatory support

A Shanghai Shimao Co Ltd bond that matures in January 2022 rose 11.7 percent, making it the top gainer on Shanghai Stock Exchange’s corporate bond market on Thursday

Bonds issued by a subsidiary of China’s Shimao Group Holdings rocked recently by concerns over the developer’s financial health climbed as much as 12 percent in Shanghai on Thursday, after local media reported that the city’s regulators have offered to help the embattled industry.

Sharp falls in Shimao's shares and debt this week were triggered by worries over an asset sale and cancelled apartment deals.

A Shanghai Shimao Co Ltd bond that matures in January 2022 rose 11.7 percent, making it the top gainer on Shanghai Stock Exchange’s corporate bond market on Thursday. It is still trading at 73.5 yuan ($11.54) though, compared with a face value of 100 yuan ($15.70), as the market prices in the chance of a default.

Most of Shimao’s other bonds in Shanghai also gained sharply, while Shimao Group shares bounced back more than 6 percent in morning trading in Hong Kong.

Regulators in Shanghai, including local branches of the People’s Bank of China and the China Banking and Insurance Regulatory Commission (CBIRC), held meetings with some real estate firms on Wednesday and on Dec. 9, local media, including the 21st Century Business Herald, reported.

At the meeting, regulators urged developers to assume their repayment obligations, while offering to help meet developers’ rational funding needs to help the firms manage their difficulties, according to the reports.

Chinese developers have been under enormous strain during the year, with many grappling with a liquidity crunch as Beijing has pursued a relentless regulatory quest to reduce leverage of the heavily-indebted sector.

Chinese creditors filed suit against Evergrande from Aug. 24 to Dec. 9 over more than $13 billion in allegedly overdue payments, the Financial Times reported. The company isn’t able to repay so many creditors with its limited resources, the report cited an unidentified Evergrande executive as saying.