Source: Broker China
On November 17, the People's Bank of China, the General Administration of Financial Supervision, and the China Securities Regulatory Commission jointly held a symposium on financial institutions to clearly support real estate companies in rational equity financing through the capital market.
Broker China reporters learned from relevant sources that the financial management department will actively support the steady prevention and mitigation of the risks of large housing enterprises, work together to provide reasonable financing support and financing supervision for real estate enterprises, and support the continued development of private housing enterprises with standardized operations. Actively play the role of the “central government and local cooperation” credit enhancement model to help resolve the difficulties of private housing enterprises in issuing debts. At the same time, do a good job of supervising real estate equity and bond financing and standardize the use of raised funds. Adhere to the “one division, one policy” to resolve the risk of major housing enterprise bond defaults, continue to deal with the centralized delisting problem of listed housing enterprises, and ensure “retreat and stability.”
Huang Wentao, chief economist at CITIC Construction Investment Securities, said that the joint meeting of the three ministries and commissions once again made it clear that the reasonable financing needs of real estate enterprises with different ownership systems should be treated equally, reflecting the supervisory authority's next step in firmly supporting reasonable loans and equity debt financing for real estate enterprises. It is expected that the strength and breadth of subsequent policy implementation will increase, which will greatly benefit the real estate supply side in helping the real estate supply side get out of trouble faster.
Support housing enterprises to properly finance through capital markets
The financial institution symposium held by the three departments studied recent key tasks such as real estate finance, credit investment, and debt risk mitigation on financing platforms. In the field of real estate finance, the conference emphasized that over the past period, the financial sector has actively cooperated with industry authorities and local governments to maintain the stability of key financing channels such as credit, bonds, and equity from both the supply and demand sides of the real estate market, support the improvement of industry operations, optimize and adjust personal housing loan policies, and focus on stabilizing the real estate market, which has achieved good results.
Up to now, there are 104 A-share listed housing enterprises and 98 domestic housing enterprises listed overseas, including 93 Hong Kong stocks, with a total market value of about 2.3 trillion yuan. At the end of last year, the Securities Regulatory Commission introduced policies and measures such as the “Five Rules on Equity” to support the stable and healthy development of real estate, adhere to the linkage between stocks and bonds, insist on equal emphasis on financing support and risk prevention and control, meet the reasonable financing needs of normally operated housing enterprises, and deal steadily with the risk of housing enterprise bond defaults.
Specifically, the Securities Regulatory Commission supports housing enterprises to make reasonable financing through the capital market. In terms of equity financing, since the end of last year, 8 refinancing and mergers, acquisitions and restructuring projects for listed housing enterprises at home and abroad have been registered or filed by the Securities Regulatory Commission. The proposed total financing amount is about 44 billion yuan; a pilot real estate private equity fund has been launched.
In terms of bond financing, in January-October of this year, housing enterprise corporate bonds and asset-backed securities were issued more than 230 billion yuan. Increase credit to support private housing enterprises in issuing bonds through the “central-local cooperation” model between China Securities Finance Corporation and local guarantee companies. Furthermore, it completed the issuance and listing of the first batch of affordable rental housing real estate investment trusts (REITs) to promote the revitalization of existing assets.
At the same time, the Securities Regulatory Commission has also increased its financing support for constructing a new model of real estate development. On the one hand, it actively exploited the functions of the capital market, increased support for equity and bond financing for the “three major projects” such as affordable housing construction, and introduced an implementation plan for the capital market to support affordable housing construction at the end of September. On the other hand, it is actively promoting the development of consumer infrastructure public REITs. Relevant business rules have been issued to expand the scope of publicly funded REITs assets to consumer infrastructure such as department stores, shopping centers, and farmers' markets. The first batch of 4 consumer infrastructure REITs has already been accepted.
Huang Wentao said that since the release of the “Three Arrows” of real estate at the end of 2022, the financial sector has actively cooperated with industry authorities and local governments to basically maintain the stability of key financing channels such as credit, bonds, and equity, and support the improvement of industry operations, which has played an important role in stabilizing the real estate industry.
Facilitate solutions to the problem of debt issuance difficulties for private housing enterprises
Recently, the financial sector and industry authorities jointly held a symposium on representative real estate enterprises to investigate and understand the industry's main financial needs for risk mitigation and high-quality development. The three-department symposium emphasized that all financial institutions should treat real estate enterprises with different ownership systems equally to meet the reasonable financing needs of real estate enterprises with different ownership systems, and not hesitate to lend, withdraw loans, or cut loans to real estate enterprises that operate normally. Continue to make good use of the “second arrow” to support private real estate enterprises in issuing bonds and financing. Support real estate companies to make reasonable equity financing through the capital market. It is necessary to continue to cooperate with local governments and relevant departments, adhere to the principles of marketization and the rule of law, increase financial support for insurance buildings, and promote mergers, acquisitions and restructuring in the industry. It is necessary to actively serve the construction of the “three major projects” such as affordable housing, speed up supply-side reforms in real estate finance, and promote the construction of a new model of real estate development.
Relevant sources from the Securities Regulatory Commission said that the CSRC will implement the deployment requirements of the Central Financial Work Conference and this symposium, support the steady prevention and mitigation of the risks of large housing enterprises, do a good job of providing reasonable financing support and financing supervision for real estate enterprises, and promote the stable and healthy development of the real estate industry.
First, treat them equally to meet the reasonable financing needs of real estate companies with different ownership systems. Maintain the overall stability of equity and bond financing channels for housing enterprises, and support the continuous development of private housing enterprises with standardized operations. Actively play the role of the “central and local cooperation” credit enhancement model between China Securities Finance Corporation and local guarantee companies to promote solutions to the difficulties of private housing enterprises in issuing debts. At the same time, do a good job of supervising real estate equity and bond financing and standardize the use of raised funds.
The second is to properly handle relevant risks and investigate and punish irregularities. Adhere to “one strategy, one policy” to resolve the risk of major housing enterprise bond defaults. Continue to deal with the issue of centralized delisting of listed housing enterprises to ensure “retreat and stability.” Strictly investigate and punish illegal and irregularities such as financial fraud, disclosure of false information, and failure of relevant intermediaries to perform their duties with due diligence by listed housing enterprises and debt-issuing housing enterprises.
Huang Wentao pointed out that by taking multiple measures together, the Securities Regulatory Commission has taken multiple measures to actively play the role of the “central and local cooperation” credit enhancement model between China Securities Finance Corporation and local guarantee companies. Essentially, it is an endorsement of credit enhancement for real estate enterprises that have fallen into a liquidity crisis. To a certain extent, it can enhance the market's confidence in real estate companies' financing and promote the continuous smooth flow of their financing channels. At the same time, regulatory measures are adopted to ensure that the actual use of funds raised matches the purpose raised, so as to prevent incidents of illegal use of funds and infringement of investors' rights and interests.
Keep real estate financing smooth and orderly
After a series of favorable policies on the demand side, such as “housing approval and no loan” and reduction in mortgage interest rates, the supervisory authorities sent a positive signal on the financing side, clearly stating that they would meet the reasonable financing needs of housing enterprises and maintain the stability and order of real estate financing.
In mid-July, the regulatory authorities granted housing enterprises and the industry a longer mitigation period for the extension of policies related to the “Financial Rules”; in early August, a series of private enterprises, including housing enterprises, were investigated to promote the connection between supply and demand between banks and enterprises; at the end of August, they once again emphasized the need to continue to implement the “16 Financial Rules” for real estate; in the same period, the Securities Regulatory Commission also stated that it should maintain the overall stability of housing companies' stock and bond financing channels and support the reasonable financing needs of normally operated housing enterprises. It was also announced that the refinancing of listed housing enterprises is not subject to breakdowns, breakdowns, and loss restrictions. This three-department symposium started from the main financial needs of housing enterprises and clarified the level of support on the financing side.
“However, we still need to see that the 'Three Arrows' has also encountered various problems during implementation, such as equity and bond investors voting with their feet, and banks avoiding exposing more risk exposure.” Huang Wentao pointed out that the current real estate industry shows a structural contradiction between supply and demand, and the policy level also provides policy relaxation and support at the supply and demand levels. It is necessary for the supervisory authorities to continue to give strong policy support to the plight of real estate companies, prioritize the many blockages and difficulties on the financing side, mergers and acquisitions side, and management side, substantially improve the cash flow situation of real estate enterprises with different ownership systems, and improve market expectations and confidence on the supply side and demand side of real estate. Only when “improved cash flow on the corporate side and improved residents' income expectations” resonate on both the supply and demand sides can the real estate industry truly achieve a solid recovery.
Yan Yuejin, research director of the Yiju Research Institute, also pointed out that the financial situation of housing enterprises requires both blood transfusions and hematopoiesis. In terms of blood transfusions, in fact, the key is to support the “16 Financial Rules.” However, in terms of hematopoiesis, the key is to boost sales data; this is the key. The biggest advantage of the real estate market is that the demand for home purchases exists, but it has not been fully explored.
“Looking ahead to future policy trends, it is expected that the central level will continue to sort out the steady operation channels of the real estate industry, continue to strengthen policy support, give the market clear regulatory expectations and signals, and maintain flexibility in closing and release.” The China Bond Credit Real Estate Industry Research Team said.
Editor/Corrine