China Vanke says it has plans in place amid short-term liquidity pressure

State-backed property developer China Vanke said it is facing short-term liquidity pressure and operational difficulties, but added that it has prepared “a basket of plans” to stabilise its business and cut debt.

A Basket of Plans

Vanke’s Hong Kong-listed shares were down more than 1% in late trading on Monday after earlier hitting a record trading low, while its Shenzhen-listed shares edged up 0.6%, stabilising after nine consecutive sessions of decline.

Investors have been selling off Vanke’s shares and bonds in the past few weeks on liquidity concerns, triggering a rare central government directive to help the Shenzhen-based company.

Adding to its woes, S&P last week became the last of the major credit rating firms to strip its investment grade status.

The Support

In a Sunday meeting with analysts hosted by Chairman Yu Liang and CEO Zhu Jiusheng, the developer said it had the support of Shenzhen’s state asset regulator as well as its largest shareholder, state-owned Shenzhen Metro, after reporting its situation to them, according to a filing that summarised comments made by the company.

Analysts said the market will closely watch whether Vanke will be able to refinance as it plans, because banks are reluctant to extend credit in the current environment.

Financial Problems

“Financial problems will take time to solve, but the fact that the management came out yesterday to explain the situation has eased some speculation that it was in trouble,” said Steven Leung, director of UOB Kay Hian.

About E. J. McKay

E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.