A record-breaking rally in Chinese property bonds is highlighting the huge sums of money primed to flow into the distressed securities should Beijing dial back its industry crackdown.
High yield notes jumped as much as 10 cents on the dollar and Chinese property stocks surged on Wednesday after reports that regulators may ease curbs on developers’ access to funds from presold homes. Bonds of Country Garden Holdings Co. and Sunac China Holdings Ltd. saw record gains, only days after tumbling to unprecedented lows. In the stock market, short-seller favorite Agile Group Holdings Ltd. rose 13%, the most since 2015.
With a crisis of confidence and financial contagion spreading across the property market this week, regulatory easing would be welcome reprieve for a credit market that’s now saddled with billions of dollars in losses. Even if it’s unclear whether Wednesday marks a turning point for the beaten-down sector, traders are having a hard time turning down bets that things will improve.