HSBC Global Research downgraded Country Garden, cut target price to HK$1.1

 

>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<

 

 

The recent news that Country Garden has failed to pay the coupon of two USD-denominated bonds in time increases the potential risk of default and triggers investor concerns and stock sell-off, HSBC Global Research said in a note, noting that there is a 30-day grace period for coupon payment. 

Nevertheless, if the group’s sales in the second half of the year fell by more than 40% year over year, it will face huge liquidity pressure, HSBC said.

The broker further downgraded its rating on Country Garden to Hold and slashed its target price from HK$2.9 to HK$1.1. Similarly, it downrated Country Garden Services from Buy to Hold and chopped its target price from HK$19.9 to HK$7.5.

HSBC noted that, even though Country Garden’s credit situation is deteriorating, it cannot underestimate that the upcoming property market support policies may reverse the market’s risk appetite, in turn leading to a rebound in stock prices in the Chinese real estate sector.