HONG KONG, Jan 10 - Sunac China's shares and bonds have taken a significant hit following a liquidation petition filed against the beleaguered property developer. The petition, lodged by a unit of state-owned China Cinda Asset Management, adds to the growing concerns over Sunac's business recovery and ability to repay its debts, even after a major offshore restructuring concluded in late 2023. A hearing is set for March 19, highlighting the urgency of the situation that continues to plague the struggling property sector in China.

On Friday, shares of Sunac plummeted up to 29.7% in early trading before recovering slightly to settle down 21% at HK$1.38, as fears grow about the ongoing liquidity crisis facing many Chinese developers including Country Garden and China Evergrande. The predicament has led to increasing scrutiny from investors regarding the sustainability of these companies amid a challenging economic climate characterized by persistently weak home sales.

Reports indicate that Sunac, which was previously among the top developers in China, is grappling with considerable debts totalling 277.4 billion yuan ($37.83 billion). The situation has worsened as weak property sales have prompted analysts to predict a new wave of offshore debt restructurings in the sector, given that a sizeable 700 billion yuan ($95.5 billion) in property bonds are due for repayment in 2025.

According to SCMP, the liquidations are symptomatic of the broader challenges within China's property market, which has seen a steep decline in sales. The top 100 Chinese developers experienced a 28% drop in home sales in 2024 compared to 2023. As these developers struggle with repayment obligations, many are now facing insolvency proceedings.

China's efforts to stabilize the property sector, which is crucial to the economy, have had limited success, failing to restore buyer confidence. Past measures have not sufficiently improved the overall sentiment. For instance, Country Garden recently suggested terms to cut its offshore debt significantly, reflecting the systemic issues pervading the industry.

While Sunac managed to finalize a comprehensive debt overhaul in November 2023 after a prior liquidation threat was withdrawn, its latest difficulties suggest that optimism may be fleeting. As per Reuters, Sunac's management has communicated to some bondholders their uncertainty about meeting crucial repayment deadlines for restructured bonds maturing this September.

As the company navigates this precarious financial landscape, the looming hearing is expected to be closely followed by investors and market analysts alike, underscoring the urgency for a robust recovery plan amid mounting concerns over defaults and ongoing market instability.