Shimao shares rose about 7% on Monday after Chinese businessman Caixin reported that the troubled developer was selling all of his local, residential and commercial projects.
The rally marked a turnaround from Friday’s session when it plunged nearly 17% after Reuters reported it failed to make full repayment on a trust loan.
In a Monday note, ratings giant S&P Global said that default risks in China’s real estate sector will likely escalate in the first quarter of this year, especially if policy doesn’t “meaningfully ease.”
As debt worries China’s housing sector grows, developers like Evergrande have been trying to sell their properties in recent months to reduce shortages.
Shimao will be the latest to follow. The stock has since split its profits but was still trading at more than 2% more.
The rally marked a change in Friday’s schedule when it dropped by about 17% after Reuters reported it had failed to repay the loan in full.
In a statement on Monday, rating agency S&P Global said the automatic risk to China’s retail sector is likely to increase in the first quarter of this year, especially if the policy “does not slow down in a meaningful way.”
“A large number of Chinese engineers are still under pressure and are facing strong financial problems,” said S&P Global Ratings debt analyst Ricky Tsang.
The organization said surveillance of retail funds remains “very strong.” This means that engineers have to save a large portion of their money from the previous sale of the property, limiting the amount that can be used to repay debt maturity.
China’s vast real estate industry has come under pressure as Beijing seeks to reduce developers’ debt-to-debt reliance over the past two years. That created Evergrande’s debt problems, which culminated in the second half of last year as the world’s most indebted engineer finally failed.
Those problems have spread to other engineers. A growing number are facing revenue problems and have not yet paid their debt obligations – even healthy engineers like Shimao have not been rescued.
The S&P noted that the total number of sector bonds maturing this year is large, with $ 40 billion to be deducted in the first half of 2022. Of that, 54% represent maritime debt.
Tsang also said developers have a lot to pay for next New Year, which also makes it harder to manage money.
Payments made to construction firms and suppliers before the New Year holidays in early February may come first, the S&P said, with officials emphasizing the importance of respecting home delivery to buyers.