Thread by @RChoongWilkins

Tentative signs that Chinese authorities may be relaxing some property policies policies has stemmed panic-selling in credit markets. That won’t offer much relief for many developers.

This is why 👇 THREAD 1/

2/ It looks like Beijing will use state firms to ease a historic liquidity crisis: government-linked firms may be used to acquire distressed developers triggered the first real gains for property notes since Evergrande ran into trouble.
shorturl.at/tzTZ2

3/ State developers are already selling sizable bond deals in a revival of the interbank bond market. Cash could be used to buy up private developers’ assets as they try to raise cash.

4/ This isn’t a wholesale reversal. This is policy finetuning. Ie. second phase of reform.

Focus is on shoring up the strongest firms, state-led financing and ensuring there’s sufficient liquidity in the much larger onshore market where a credit crisis would be most damaging.

5/ That’ll help reel in contagion and stop the downward spiral of a sentiment-driven selloff, but there’s little immediate impact for most stressed developers laden with imminently-maturing dollar debt that they’re unable to refinance.

6/ While we haven’t seen a default since Oct. 26 when regulators told developers at a meeting they need to meet all their debt obligations, that could change over December and January when stressed developers will once again face hefty maturities. Just take a look at Kaisa.

7/ And take a look at the developers' debt bill for next year. This is just public bonds.

While yields have come down to about 19% from a historic 25% -- that still means borrowing costs are prohibitively high for most firms.

More here: shorturl.at/fyU08

8/ Fresh signs of stress at Kaisa and Aoyuan are already dragging down China's dollar junk bonds.

Kaisa matters because -- like Evergrande -- it's got a whole lotta dollar debt. $11.6 billion across 18 notes.

bloomberg.com/news/articles/… latest w/ @frostyhk