Country Garden (HKG: 2007) and also Country Garden Services (HKG: 6098) - so that’s CG both plain and simple - are down in the 7 and 8% range today. Over the weekend the western press published more worries about the bond prices of the group. But that’s more likely a reaction to rather than a cause of moves in Hong Kong shares. What’s really happening here is that we all face great uncertainty over how the China property market is going to turn out. So, there’s a great deal of volatility in property group share prices as views change and twist and turn in the wind.
From 6 days back: China’s biggest property developer Country Garden Holdings urged “guidance and support from the government” as the debt stricken company estimated it would report a loss for the first half of the year.
The company, whose bond prices have been under tremendous pressure despite signing earlier this month a dual tranche loan deal, has significant bond maturities coming up later this year.”
Well, yes, those bond prices go up and down like the rental underwear of a lady of negotiable virtue. The big question being, well, is there going to be that government support for the sector or not? It’s even possible that government will support the sector but not the companies.
Country Garden share price from Google Finance
As we’ve pointed out before about Country Garden: “Now, as every free market economist knows, government says and government achieves is not quite the same thing. However, we do now see what the general thrust of CCP policy is going to be. Reducing some of the financing restrictions upon property companies, increasing domestic demand and so on. They're to try to reflate that is. Well, it might work at that. But the bounce in property stocks like Country Garden is based upon this policy announcement. Given the importance of real estate in the Chinese economy this has also led near all China related stocks higher of course.” Well, today the feeling is that perhaps this isn’t going to be enough.
We’ve also looked at Country Garden Services: “Country Garden Services (HKG: 6098) (OTCPK: CTRGF) shares fell 17.5% in Hong Kong today. This was the worst performance across the China property sector - well, except for the bonds of the parent, Country Garden, which now seem to be trading at 20%. That's for the dollar bond of course, the assumption being that overseas investors are far more likely to get it in the neck than anyone domestically.”
We’re simply where we don’t know. We’re not really sure how bad things are internally to the companies. We also don’t know quite what - if anything very much - the government is going to do. So it’s really very difficult to come to an objective valuation - which means the prices leap about as opinions do.
