Ping An throws cold water on Country Garden rescue

Themis Qi

Ping An (2318) yesterday denied that it had received a request from Chinese authorities to acquire Country Garden (2007) and said it had sold all its shares in the embattled developer in September.

The insurer's announcement came after Reuters reported that China's State Council had asked the local government of Guangdong Province to arrange a plan for Ping An to save Country Garden by taking a controlling stake.

Ahead of the denial, Ping An's shares in Hong Kong once free-fell 5 percent in afternoon trading and ended 5.4 percent lower than the previous close. Country Garden, however, surged 12 percent.

The market, however, seemed to welcome the reported rescue plan, pushing other mainland developers up. Sunac China (1918) soared 30 percent and China Evergrande jumped 28 percent.

Longfor (0960) and Sino-Ocean (3377) rose 6.8 percent and 9.6 percent respectively, benefiting from a reported meeting about financing with regulators on Tuesday.

Once the second-largest shareholder of Country Garden, Ping An had cut its stake below 5 percent as of August, which meant the insurance giant had no need to reveal its share reduction any more.

Country Garden has been cash-strapped and unable to complete projects. Last month, the country's largest private property developer defaulted on a bond for the first time ever.

Ping An's denial leaves Country Garden struggling compared to China Vanke (2202) which just got the Shenzhen government's strong support this week.

Vanke, which Shenzhen said is "safe in financials," reportedly plans to use its own funds and overseas credit to repay offshore bonds due next year.

However, JP Morgan expects mainland developers will still underperform the overall market, and prefers state-owned builders to Vanke.

Meanwhile, the People's Bank of China's Governor Pan Gongsheng said the spillover effects of the mainland property market on the financial sector are controllable.

Pan said China's property sector is undergoing a significant transformation and looking for a new balance, which brings challenges but also opportunities.