SHARES IN CHINESE PROPERTY FIRMS SLUMP AMID PLANNED U.S. INTEREST RATE HIKE

HONG KONG China Evergrande Group shares slumped on Thursday after the developer’s thinly detailed road map for restructuring left investors dissatisfied and its indebted peers also fell on concerns higher interest rates would raise financing costs.

Regulatory curbs on borrowing have driven China’s property sector into crisis, highlighted by Evergrande, the world’s most indebted property firm. The contagion has engulfed other Chinese developers, roiled global financial markets in the past year and contributed to a slump in China’s property market, which accounts for a quarter of its economy.

Evergrande closed 3.4 per cent lower at 1.71 Hong Kong dollars (28 cents) on Thursday, narrowing from a 9.6-per-cent loss in early trading.

The Hang Seng Mainland Properties Index shed 2.6 per cent, while the benchmark Hang Seng Index dropped 2 per cent.

The U.S. Federal Reserve said on Wednesday it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases.

“Chinese real estate companies are highly leveraged, with a lot of overseas debt, so U.S. Fed signalling large room for rate hikes will put even more pressure on their financing,” said Alvin Cheung, associate director of Prudential Brokerage Ltd.

The long-awaited communication between Evergrande and creditors occurred as Beijing plans to tighten control over the property developer, while taking measures to stabilize China’s property sector.