Epic Market Rescue! New Town Holdings Plans to Issue 15 Billion Yuan in Bonds—What Is the Impact of the "Financial 16 Measures"?

On November 12, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued the "Notice on Effectively Providing Financial Support for the Stable and Healthy Development of the Real Estate Market." The notice includes 16 measures covering real estate financing, ensuring the delivery of pre-sold homes, managing risks associated with distressed property developers, and protecting the legitimate rights and interests of housing finance consumers.

Here are a few simple examples:

In real estate financing, all types of property developers—state-owned, private, and others—are treated equally; lending for real estate development is kept stable; bond issuance by high-quality property developers is supported; and proactive measures such as extending the maturities of existing loans and adjusting repayment schedules are implemented to provide support and facilitate the completion and delivery of projects.

To ensure the delivery of pre-sold residential units, policy banks are supported in providing special-purpose loans for this purpose, and financial institutions are encouraged to offer complementary financing. Regarding risk resolution for troubled property developers, high-quality real estate firms are supported in merging with or acquiring projects from distressed developers. To safeguard the legitimate rights and interests of housing finance consumers, parties are encouraged to engage in lawful, autonomous negotiations on deferring principal and interest payments, while effectively protecting the personal credit reporting rights associated with such loan extensions, among other measures.

On the very first evening after the document was issued, several listed companies promptly took action.

According to the website of the National Association of Financial Market Institutional Investors, Longfor Group has had its RMB 20 billion shelf registration issuance approved; one day later, Xincheng Holdings issued an announcement stating its intention to apply to the Association for an additional RMB 15 billion in debt financing instrument registration; meanwhile, Poly Development announced that the Association has agreed to accept the company's registration for a total of RMB 10 billion in medium-term notes and short-term financing bills.

Stimulated by this news, Longfor Properties surged 25% at the opening, while New Town Holdings hit the daily limit up with a 10% increase; in addition, Vanke A and Poly Development both rose by more than 4%; on the Hong Kong stock market, Country Garden climbed nearly 50%, and Sunac China Holdings rose by more than 40%.

Clearly, in the eyes of the capital markets, the '16 Measures' can be described as an epic positive development!

Take Xincheng Holdings as an example.

In October this year, Xincheng Holdings recorded contracted sales of approximately RMB 9.075 billion, a year-on-year decrease of 58.94%; the corresponding sales area was about 932,500 square meters, down 62.55% from the same period last year. For the first ten months, Xincheng Holdings' cumulative contracted sales totaled approximately RMB 102.95 billion, a year-on-year decline of 46.63%; the total sales area reached 10.4536 million square meters, down 44.48% year on year.

Overall, New City Holdings' operating revenue is in line with its real estate sales area!

Specifically, refer to the 'Three Red Lines.'

According to the third-quarter report, New Town Holdings' asset-to-liability ratio, excluding advance receipts, stands at 68.37%; its cash-to-short-term-debt ratio is 134.52%; and its net debt-to-equity ratio is 47.64%, meaning it has not breached any of the regulatory red lines. As of the end of September, the company's cash on hand totaled RMB 34.508 billion, exceeding its short-term interest-bearing liabilities.

From a financial perspective, Xincheng Holdings is a relatively high-quality property developer!

In addition, companies such as Vanke A and Poly Development have also remained compliant with all three red lines. This means that, following the release of the "16 Measures," these firms are poised to gain greater strategic flexibility thanks to their more prudent financial positions—particularly in pursuing mergers and acquisitions of troubled property developers' projects.

In other words,During the downturn in the real estate sector, high-quality companies are poised to further expand their market share!

Finally, let's briefly discuss "ensuring the delivery of pre-sold homes."

As mentioned earlier, in terms of ensuring the delivery of pre-sold residential projects, "policy banks are supported in providing special-purpose loans for this purpose, and financial institutions are encouraged to offer complementary financing." However, over the past year, homebuyers have increasingly favored properties developed by larger, financially stronger developers, or have opted instead to purchase completed or nearly completed units rather than waiting for off-plan properties.

In a single sentence,The real estate industry is no longer in a "period of across-the-board prosperity"; instead, we are entering an era of increasing differentiation.

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