After a media report said CIFI Holdings Group Co had defaulted, investors dumped shares and bonds of Chinese property developers, adding to worries over the crisis-stricken real estate sector.
The Hong Kong-listed shares of CIFI Holdings fell 26 per cent in morning trading to a new record low after credit intelligence provider Reorg reported that the Chinese developer missed payments on certain non-standard debt.
In response to questions about the report, CIFI said it was actively seeking solutions, without giving further details. The company said it was China's eighth-largest listed developer last year.
The share slump came after CIFI's chairman predicted unprecedented liquidity stress ahead and caused savage sell-offs in the sector.
An index tracking mainland developers listed in Hong Kong fell more than 5 per cent to record lows.
The bonds issued by property firms such as CIFI Holdings, Sunac Real Estate and Gemdale Corp were among the biggest losers in Shanghai. There was a decision by the Shanghai Stock Exchange to suspend trading in a CIFI bond due to abnormal fluctuations.
The panic selling, which weighed on an already bearish market, shows lingering investor pessimism toward the property sector despite the measures taken by Beijing to aid the sector.
Markets don't expect fresh property stimulus to be announced after the 20th Communist Party Congress, which will be held on October 16.
Reorg reported that CIFI Holdings missed payments on debt because of a project company known as Tianjin Xingzhou Real Estate Development Co.
In a letter to employees dated Sept. 27, CIFI Chairman Lin Zhong said the company's priority is now to survive, as property sales in China remain sluggish amid COVID 19 outbreaks, an economic slowdown and a morgtage boycott.
Lin said in the letter that was widely distributed via social media and confirmed by the company that hardship and ordeal will persist for a long period of time.
The cash flows of the CIFI will meet unprecedented challenges in the coming months. A source with direct contact with Lin told Reuters that Lin is under immense pressure, as there is no fresh, big policy support in sight, so it's unclear when the industry can see a gleam of hope. CIFI was downgraded last week by Fitch Ratings, which cited the developer's declining liquidity buffer and higher leverage.
In August, the property market in China worsened, with official data showing home prices, sales and investment all falling, adding pressure on the sputtering economy. A number of leading developers have defaulted on bonds.