Lu Zhiqiang is a good brother of Xu Jiayin! Oceanwide international underwrite Evergrandes US dollar debt

 Lu Zhiqiang is a good brother of Xu Jiayin! Oceanwide international underwrite Evergrandes US dollar debt

A few days ago, the real estate enterprises had a hard time, and suffered from the double killing of stock price and dollar debt.

On March 23, the Federal Reserve launched the unlimited QE, the overnight US stock market remained low, and the US dollar index continued to fall to around 101.5.

A shares went out of V yesterday, and the major indexes rebounded after diving. Chinas real estate listed companies in a round of stock debt double kill, the stock price has finally turned red.

In terms of A-shares, CITICs first-class real estate sector rose 2.34% yesterday, slightly warmer than the 5.26% that fell in recent five days. After nearly 20 days of decline, Hong Kong stock real estate sub classification (887129. WI) bottomed out, up 4.56%.

On the other hand, the real estate dollar debt is miserable.

In the two weeks from March 9 to March 22, almost all kinds of Chinese dollar bonds fell. The investment grade of Chinese dollar bonds fell 5%, the yield rose 88bp, the high yield fell 11.7%, and the yield rose 614bp.

From the perspective of industry sector, the overall decline of real estate dollar bonds is relatively large. Last week, the central upward range of yield and interest margin of real estate dollar bonds exceeded 400bp. Since March, the cumulative expansion range of yield and interest margin exceeded 700bp. At present, the median of industry yield exceeds 14%, and the interest margin reaches 1373bp. The yield of individual bonds in the industry is almost double-digit and above.

Market participants generally believe that the dollar liquidity crisis is the root cause of the sharp drop in the current round of Chinese dollar bonds.

In the first ten days of March, risk aversion increased, risky assets were sharply adjusted, and the pressure of fund redemption led to the selling of various assets to supplement liquidity, including Chinese dollar bonds. Due to the upgrading of global asset selling pressure and overstocking of selling prices, asset prices fell sharply, investors faced the problem of closing positions and reducing leverage, and the selling pressure was further upgraded.

Real estate good friends all the way to the bottom

The real estate dollar bond yield soared, forming a huge price difference with the domestic real estate bond yield. Many people said that there are gold pits everywhere, its time to copy the bottom, and even some netizens listed the list and strategies for copying the bottom.

According to the Research Report of Huatai solid income team, the yield of overseas Chinese dollar real estate bonds rose from 6.31% on March 6 to 11.97% on March 18, while the yield of domestic high-grade three-year real estate bonds did not fluctuate much. On March 19, the valuation difference between the two bonds was at a historical high of 1406.99bp. Excluding about 2% of the QDII channel fee, the interest margin at home and abroad was still attractive.

With the easing of liquidity shock, there is a certain recovery space for Chinese dollar bonds. It is believed that individual bonds with stable credit qualifications but sold at a discount under the liquidity shock have a certain allocation value. It is suggested to pay attention to the opportunity of killing by mistake, endure short-term fluctuations and obtain coupon income. Huatai solid collection team thinks.

As a matter of fact, there are already real estate companies in the market.

Recently, oceanwide international has purchased a number of overseas bills of real estate enterprises, including contemporary real estate, fancy time and Evergrande. Among them, what attracts the most attention of the market is Oceanwide Internationals continuous bottoming out of Evergrandes US dollar debt.

Lets take a look at a series of bottom reading operations of Oceanwide International:

March 9th

On March 9, oceanwide international purchased $10 million of Evergrande notes at a price of $9.475 million, equivalent to $94.75; on the same day, oceanwide hotels purchased $10 million of Evergrande notes at a price of $9.35 million, equivalent to $93.5.

March 12th

Oceanwide international purchased $10 million Evergrande notes at a price of $8887500, equivalent to $88.875.

March 13th

Oceanwide international purchased US $12.4 million and US $10 million Evergrande notes respectively at US $9.7935 million and US $8.4 million, equivalent to US $78.98 and US $84 respectively.

March 16th

Oceanwide international purchased 5 million US dollars Evergrande notes at a cost of 4 million US dollars, equivalent to 80 US dollars.

March 18th

Oceanwide international purchased $10 million Evergrande notes at a price of $7.1 million, equivalent to $71.

March 19th

Oceanwide international purchases $10 million Evergrande notes at a price of $5.8 million, equivalent to $58.

This series of operations is not magic! Some market people jokingly said: 80 after 90, 70 after 80, 60 after 70.. The more you buy, the more you fall!

In addition, some real estate companies bought back their own bonds in person.

On March 19, rongchuang China announced that the Company repurchased a total of US $78.6 million of notes in the open market, while the price of rongchuang related bonds had reached a historical low near us $95.

However, the CICC fixed income team believes that from the perspective of repayment, the volume of repo in the secondary market under the open repo mode is small, and the reduction of the overall bond repayment pressure may be limited.

The secondary market has been falling continuously. What is the situation of the primary market?

According to the China Financial Research Report, last weeks sharp adjustment of US dollar bonds by Chinese investors resulted in a near standstill of primary issuance, with a weekly issuance volume of only US $685 million, down 78% month on month. From the perspective of industry distribution, the issuance volume of financial, urban investment and industrial bonds are respectively US $545 million, US $81 million and US $59 million, and there is no new issuance in the real estate industry.

Will real estate companies access to overseas financing be closed? People in the industry think the impact is not significant.

At present, the mainland real estate enterprises can only borrow the new to repay the old. The main body of issuing bonds is also the relatively large domestic real estate enterprises, with large scale of funds and relatively abundant liquidity. And compared with domestic financing, the scale of US dollar debt is relatively small, and the stock of real estate US dollar debt will gradually shrink in the future when the policy remains unchanged. A securities firm fixed income analyst said.

Chinese dollar bonds, also known as Kungfu bonds, are issued overseas by Chinese enterprises in dollar denominated bonds.

According to the Research Report of Everbright Securities fixed income team, as of March 20, 2020, there are 1927 US dollar bonds in stock with a total scale of 891.8 billion US dollars. BlackRock, Huili Group, Allianz Group, JPMorgan Chase, Prudential Group and other foreign large-scale fund companies, insurance institutions and banks are the main holders of Chinese dollar bonds, and the holding scale of the top 18 holders accounts for more than half of Chinese dollar bonds.

The proportion of real estate enterprises in Chinese dollar bond issuers is the highest. At present, there are 93 issuers in the real estate sector of the overseas market, with a total of US $210.75 billion of existing US dollar bonds. From the beginning of this year to March 20, 50 real estate entities issued US dollar bonds overseas, with a total amount of US $26.05 billion. Compared with the same period in 2019, the issuance scale has declined.