9/11/2021 Financial News In China: 12 Real Estate Companies Defaulted; Himalaya Withdraws U.S. IPO Application

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1.Communist China’s Real Estate Companies Have Defaulted On 12 Debts In Half A Year

According to statistics from a research institute in China, in the first seven months of this year, the cumulative growth rate of bond financing in the real estate industry continued to decline.  From January to July, the total amount of domestic and foreign bond financing of real estate enterprises was about 642.8 billion yuan, down 13% from the same period in 2020, and the cumulative growth rate reached the lowest point since 2018. According to an analyst of the Institute, the debt maturity of real estate companies this year reached 1282.2 billion yuan, which will be the peak of debt repayment between 2019 and 2023.  Judging from the current bond issuance situation, the scale of debt repayment in 2022 is expected to remain at a high range of around 900 billion yuan. The grim situation means that the past financing routine of “borrowing the new to pay for the old” of real estate companies may be difficult to maintain.

2.Chinese Audio Platform Himalaya Withdraws U.S. IPO Application

Online audio platform Ximalaya Inc. applied to the US Securities and Exchange Commission (SEC) on Thursday to withdraw its initial public offering (IPO) plan for American Depositary Shares (ADS).  The company said it has decided not to advance its stock offering plan.  In April of this year, the Chinese company applied for an IPO and said it plans to list ADS on the New York Stock Exchange under the code XIMA.

Comment: According to reports, one month after the announcement of the Himalayas IPO plan, China began to pressure Himalayas to withdraw its listing in the United States and intend to change to listing on Hong Kong stocks. In addition to Himalayas, the medical data company Zerokrypton Technology invested by Alibaba Health also shelved its plans for an IPO in the United States in July.  It is reported that the company is also considering changing its listing in Hong Kong.

3.KXBio’s Partners Negotiate To Establish Vaccine Production Facility In South Africa

The chief executive officer (CEO) of China Kexing Biological Partners said on Friday that Kexing is negotiating with local partners to establish a vaccine production facility in South Africa. Hilton Klein, CEO of Numolux Group, made the above remarks at the South Africa launching ceremony of the so-called phase III clinical trial of Coxing’s new crown vaccine in children and adolescents in South Africa.  “This clinical trial is a prelude to the establishment of a vaccine production facility between Coxing and Numolux Group in South Africa, which will cover the entire vaccination spectrum, not just the response to the epidemic,” Klein said at a press conference. “We are negotiating with Kexing to establish vaccine production facilities. In the first phase, we will carry out bottling and labeling so that we can provide vaccines to Africans as soon as possible,” he added.

Comment: Vaccines are the CCP’s tool to spread CCP virus.

4.Offshore Structures Companies Required CCP Approvement For HK IPOs

Five people familiar with the matter said that Chinese securities regulators are seeking to expand the scope of review of overseas listings of overseas-registered companies to include initial public offerings (IPOs) in Hong Kong.  The China Securities Regulatory Commission (CSRC) has set up a group to focus on companies that try to use the so-called variable interest entity (VIE) corporate structure to list overseas, which the Chinese government says has led to abuse.  However, some market participants did not expect that the scope of the review would be extended to such companies seeking to list in Hong Kong, China; Hong Kong is the preferred location for Chinese companies to raise funds overseas.  However, sources told Reuters that under the new rules being drafted, the China Securities Regulatory Commission will not exclude companies with a VIE structure that intend to list in Hong Kong, China.  Given the sensitivity of this change, the source requested anonymity.  The source added that there is no timetable for the announcement of the new guidelines.  The China Securities Regulatory Commission did not respond to a request for comment, while the Hong Kong Stock Exchange and the Hong Kong Securities and Futures Commission did not comment.

5.Commodity Prices Continue To Rise, Pushing PPI To A New High In August

Although the Chinese government has taken vigorous measures to curb the rise in metal prices, the rise in commodity prices still pushed China’s August producer price index (PPI) to its largest year-on-year increase in 13 years.  According to data from the National Bureau of Statistics of China, strong demand for coal, steel and other raw materials pushed China’s PP1 up by 9.5% in August compared with the same period last year, the largest year-on-year increase since August 2008.  In August 2008, the PPI increased by 10.1% year-on-year.  Economists surveyed by The Wall Street Journal previously predicted that the PPI will rise 9% year-on-year in August this year.  Economists at HSBC said that although the prices of some global commodities such as oil remained relatively stable in August, the sharp rise in coal and natural gas prices put upward pressure on the Chinese economy.  About 60% of China’s energy consumption comes from coal.  In order to curb the rise in commodity prices, the Chinese government has been investing in national reserves and cracking down on national product and speculation among producers. However, all these measures have limited impact on PPI, which has been rising steadily since this spring.  At the same time, the steel production limit measures introduced by the Chinese government to reduce emissions have pushed up steel prices.  Steel is a major production material in the real estate industry.

6.The Blackstone Group’s Tender Offer Fell Through SOHO China

Chinese commercial real estate company SOHO China said on Friday that Blackstone Group decided not to make an offer for the acquisition of the company’s equity because all parties agreed that the prerequisites could not be met on or before the deadline, and they also agreed that the deadline would not be postponed.  The Blackstone Group proposed in mid-June that it intends to acquire the issued shares of SOHO China at a price of up to 23.66 billion Hong Kong dollars. In August, the China Market Supervision and Administration Bureau formally filed a case for review of the declaration submitted by Blackstone in accordance with the “China Anti-Monopoly Law.”  A media report circulated among investors and lawyers groups seen by Reuters at the end of July stated that the sale of SOHO China to the Blackstone Group is facing regulatory obstacles related to the founder.

7.Three Chinese Auto Chip Dealers Fined For Driving Up Prices

China’s State Administration for Market Regulation said on Friday that three auto chip distributors, Shanghai Qiante Electronics Co., Ltd., Shanghai Chengsheng Industrial Co., Ltd., and Shenzhen Yuchang Technology Co., Ltd., have been fined 2.5 million yuan for driving up the price of auto chips in accordance with the law.  The press release published on the website of the Municipal Supervision Administration also stated that the next step will continue to pay close attention to the price order in the chip field, strengthen price monitoring, and severely crack down on illegal activities such as hoarding and price hikes. The State Administration of Supervision of the People’s Republic of China pointed out that the above-mentioned three distributors were fined for taking advantage of the imbalance between the supply and demand of domestic automobile chips, and when the purchase price was basically stable, they increased the price of automobile chips by a large margin.  Downstream auto parts companies are faced with the risk of breach of contract compensation due to lack of chips, and have to accept the high quotations from the parties.

8.Hengsheng Real Estate Lost 1.434 Billion Yuan And Defaulted On Multiple Debts

China Net Finance, September 10, recently, Hengsheng Real Estate released its 2021 interim results report.  During the period, Hengsheng Real Estate suffered serious losses, and many debts failed to repay the principal and interest on schedule. According to reports, as of June 30, Hengsheng Real Estate’s total borrowings were 19.765 billion yuan.  Among them, bank loans were 15.490 billion yuan, bonds were 66.568 million yuan, non-controlling shareholder loans were 533 million yuan, and other loans were 2.136 billion yuan.  In particular, loans repaid within one year amounted to 17.645 billion yuan, accounting for 89.27% ​​of total loans.  In the same period, cash and cash equivalents were only 556 million yuan, less than a fraction of the loan repayment within a year, and the cash short-term debt ratio was only 0.03. The announcement shows that Hengsheng Real Estate’s leverage level is still at a high level.  As of the end of June, the asset-liability ratio of Hengsheng Real Estate was 92.28%, compared with 89.47% and 89.21% at the end of 2019 and 2020, respectively.  It is worth noting that the principal and interest payable of many loans of Hengsheng Real Estate have been overdue, reaching 888 million yuan and 444 million yuan respectively.

By【G translators – Financial Team】
Author: 雪梨

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