CHINA VANKE Secures Up to RMB22B Loan Facility from Major Shareholder Shenzhen Metro Group

The analyst rating for BOC HONG KONG was maintained at "Buy" by HSBC Global Research despite concerns about its exposure to CHINA VANKE. The reasoning behind this rating includes the belief that the likelihood of BOC HONG KONG downgrading its exposure to CHINA VANKE to Stage 3 before the end of 2025 is low, primarily due to the 30-day grace period on domestic bonds. Additionally, while there is an expectation of increased credit cost provisions in the future, the base scenario suggests that any significant classification of loans as Stage 3 would not occur until 2026. This indicates a level of confidence in BOC HONG KONG's current financial stability and management of risks associated with its lending practices. However, the target price was adjusted downwards from $45.2 to $43.2, reflecting the evolving situation and potential risks.

The analyst rating for CHINA VANKE (02202.HK) is negatively impacted due to the company's request to extend the maturity of RMB2 billion medium-term notes, which is the first time it has sought an extension for public market bonds. This event is expected to negatively affect short-term sentiment in the real estate sector. Additionally, BOC HONG KONG (02388.HK) is perceived to have a relatively large exposure to Vanke's debt risk, which contributes to the cautious outlook. Despite this, BOC HONG KONG's EPS forecast for 2025 remains largely intact, although the 2026 EPS forecast was revised down by 2%, leading to a lowered target price but a maintained Buy rating.

The analyst rating for CHINA VANKE (02202.HK) was set to "Underperform" due to several key reasons outlined in the article. The company’s unexpected application to delay the repayment of RMB2 billion medium-term notes raised concerns in the market, as it may be perceived as a de facto default despite the possibility of negotiating an extension. This situation is likely to weaken Vanke's future sales and refinancing outlook, as it could erode confidence among stakeholders such as regulators, creditors, homebuyers, and suppliers. The broker, Daiwa, noted that this could lead the company into a vicious cycle of declining trust and financial instability. While there is a possibility of receiving assistance due to Vanke's benchmark status in the industry, the expectation of a market-oriented solution like debt restructuring further supports the negative outlook.

The analyst rating from Morgan Stanley for CHINA VANKE (02202.HK) was lowered due to weak property sales and lower gross profit margins. The broker reduced its 2025 property sales forecast by 14%, indicating a significant decline in sales and a depletion of land reserves. Additionally, changes in booking led to lowered revenue forecasts for the following years, resulting in increased net loss forecasts. Consequently, the target price was cut from $4.65 to $4.28, while maintaining an Equalweight rating.