On the evening of November 6,$VANKE OVERSEAS (01036.HK)$The announcement stated that in order to support Vanke, the majority shareholder, Shenzhen Railway Group promised to inject new liquidity into Vanke, with a transaction amount exceeding 10 billion yuan. Furthermore, the Shenzhen Railway Group is actively preparing to take the opportunity to buy bonds issued by Vanke on the open market.
In the afternoon of the same day, Vanke held an online conference with financial institutions to exchange views on Vanke's business conditions and recent fluctuations in Vanke's secondary market bond prices. Relevant leaders from the Shenzhen State-owned Assets Administration Commission, Xin Jie, chairman of Shenzhen Metro, and Yu Liang, chairman of Vanke's board of directors, attended the meeting.
“Vanke has sufficient security, no financial risk or management risk, and is an important member of Shenzhen's state-owned assets system. If there is a need or extreme situation, we have full confidence, sufficient financial resources and tools to help Vanke respond positively through all possible market-based and legal means.” The Shenzhen State-owned Assets Administration Commission said.
People involved in Vanke verified the information at the conference with the “Prism” authors.
Xin Jie, chairman of Shenzhen Metro, said at the meeting that the so-called “majority shareholders will reduce their holdings in Vanke” is a rumor with ulterior motives.
This game came to an end with the Shenzhen State-owned Assets Administration Commission and the majority shareholder, the Shenzhen Railway Group. Over the past half month, Vanke's foreign bonds have experienced a “roller coaster” decline and rebound. Take Vanke's foreign bonds maturing on March 11, 2024, as an example. Starting October 17, the face value of the bond plummeted from $95.868 to $85.461 per 100 US dollars. However, on November 6, the bond stopped falling and rebounded to $95.882.
However, how long Vanke can last in the future still attracts attention from bond investors and the real estate industry as a whole.
“Is there an agency that goes short or is it really bearish?” A person familiar with the capital market in the real estate industry asked the author, “If it is shorting, there should be corresponding profit tools.”
Perhaps only Vanke and market makers know the true face of this “shorting interdiction war.” However, the person mentioned above said, “How long will Vanke last? This is not only a question of Vanke, but also the entire real estate industry.”
The Shenzhen Metro stands firmly with Vanke
All eyes are on Vanke.
The Shenzhen State-owned Assets Administration Commission and the Shenzhen Railway Group played an important role in Vanke's action to counter bearish short-term debt, which also caused Vanke's “short” investors to suffer losses.
At the above conference, the Shenzhen State-owned Assets Administration Commission proposed specific support measures: including, but not limited to, accelerating the development and construction of large-scale urban renewal projects through concessions and cooperative development; increasing the liquidity of various types of investment real estate held by Vanke through collaboration and cooperation; cooperating with Vanke to optimize the long-term equity investment structure; actively organizing municipal state-owned enterprises to participate in bond subscriptions and other tasks; and actively coordinating various financial institutions to increase their support for Vanke financing.
The Shenzhen Metro also said it will stand firmly with Vanke and has prepared a rich “toolbox” to provide support.
Xin Jie, chairman of Shenzhen Metro, said that it will be released in an orderly manner to support Vanke according to market conditions, including undertaking some of Vanke's urban renewal projects in Shenzhen through market-based and rule-of-law methods to help Vanke revitalize its major assets and inject new liquidity into Vanke. The transaction amount is expected to exceed 10 billion yuan; at the same time, it is actively preparing to buy bonds issued by Vanke on the open market to boost market confidence.
With the endorsement of the Shenzhen State-owned Assets Administration Commission, Vanke shares experienced a “long absence” of a sharp rise on November 6.
By the close of trading on November 6, Vanke A had surged 6.21% to a closing price of 11.97 yuan. The Hong Kong stock Vanke Company also surged 7.25% to a closing price of HK$8.14.
Recently, Vanke has been mired in a vortex of public opinion about debt defaults. “Obviously, Vanke's performance in the capital market today is a strong response to Vanke's appeal.” Zhang Hongwei, founder of Jingjian Consulting, told the author of “Prism.”
“This is a very clear sign. On the one hand, Vanke's fundamentals are not very problematic, and Vanke is also confident of getting through the cycle safely in this round of market adjustment. On the other hand, the platforms of Shenzhen Railway and the Shenzhen State Assets Administration Commission, the majority shareholders, also clearly show the majority shareholders' support for Vanke.” Zhang Hongwei said.
Yu Liang: Freezing three feet is not a day's cold
Earlier, the three-quarter report released by Vanke A showed that revenue for the third quarter was 89.42 billion yuan, down 31.6% year on year; net profit was 3.75 billion yuan, down 22.5% year on year.
In terms of sales data, in January-October of this year, Vanke achieved a total contract sales area of 21.357 million square meters, with a contract sales amount of 346.77 billion yuan, a decrease of 9.8% over the previous year.
At the meeting on November 6, Yu Liang said that a three-foot freeze is not a one-day cold, and one policy cannot be expected to solve all problems. Yu Liang said that market recovery requires a combination of three forces: being able to buy, wanting to buy, and needing to buy.
In terms of “need to buy,” demand for housing is still huge. The current level of market construction has clearly exceeded its decline, and is accumulating potential for spontaneous restoration. In terms of “being able to buy,” various regions have introduced many policies to support reasonable housing demand since August, creating conditions for the release of demand. The problem that still exists today is the “want to buy” problem, which is to restore consumer confidence.
“To do that, first of all, the industry needs to be stable. In an industry where there are always problems, it is difficult to strengthen consumer confidence. Maintaining industry stability requires the joint efforts of all parties in the market. Second, it takes time to restore confidence. Every round of real estate cycle adjustments, from the bottom of the policy to the end of the market, and then the gradual restoration to a reasonable level, takes time.” Yu Liang said at the meeting.
“The reason for the high pressure in the past two years is that the peak of commercial housing construction delivery is compounded by the continuous decline in sales. However, judging from the construction situation in the industry, this superposition process will basically come to an end by the second half of next year.” Yu Liang said.
More than 85 billion dollars in additional financing were added during the year
Despite both declines in net revenue and profit, Vanke still has plenty of cash on hand.
By the end of the third quarter, the company had in hand capital of 103.7 billion yuan, covering a ratio of 2.2 times that of short-term debt. During the year, Vanke had no overseas debts maturing, and there were 380 million yuan of domestic credit bonds to be repaid.
By the end of September, Vanke had a cash balance of about 66 billion yuan excluding pre-sale supervision funds and restricted funds. The interest-bearing debt to be repaid within one year was about 47 billion yuan, about 1.4 times that of short-term cash debt.
In terms of financing, Vanke management said at the conference that in January-October of this year, Vanke's new financing amount exceeded 85 billion yuan, of which the average interest rate for new domestic financing was only 3.64%.
Judging from debt pressure, Wind data shows that up to now, Vanke has maintained a total of 7 overseas debts, with a total amount of about US$3.22 billion.
In 2024, Vanke had three US dollar bonds maturing. Among them, “Vanke Hong Kong 4.2% N20240607” and “Vanke Hong Kong 5.35% N20240311” had distribution scales of 600 million US dollars and 630 million US dollars, respectively. The distribution scale of “Vanke Hong Kong 3.45% N20240525” was 1,445 billion yuan.
Since late October, the price of Vanke's surviving US dollar bonds has continued to fall, and the maturing yield of many bonds has deviated sharply from coupon interest rates.
Vanke responded on October 31 that the recent changes in some of the company's domestic and foreign bond types were not due to any problems with the company's fundamentals, but mainly due to fluctuations in market sentiment.
Previously, Xin Jie, Chairman of Shenzhen Railway Group, also served as Vice Chairman of the Board of Directors of Vanke Group. Xin Jie said, “Investing in Vanke is the right choice. Recognition and support for Vanke will not change due to momentary market fluctuations.”
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