China's Property Woes Unlikely to Derail Equities Market — Market Talk

China Vanke's financial commitments are unsustainable due to its weak liquidity, S&P Global Ratings writes in a note. The company's debt obligations are currently vulnerable to risks of nonpayment of distressed restructuring, they say. The company faces a bond maturity wall of about CNY11.4 billion from December 2025 to May 2026, they add. S&P Global Ratings cut its long-term issuer credit ratings on China Vanke to minus CCC from CCC, they say. S&P Global Ratings might lower the ratings on China Vanke if they view the potential debt maturity extension as a distressed restructuring. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

China Vanke's bond extension is surprising but somewhat inevitable, Citi analysts write in a note. In the short term, it would negatively affect sector sentiment and home price expectations. However, in the mid-to-long term, its impact is likely limited, similar to that for other non state-owned enterprises with credit issues, they say. Since Vanke is only conducting a bond extension without a cut to principal, the overhang for banks is likely to be low, they say. Property firms have shouldered the direct impact while home price declines continue to damage households' confidence and consumption, Citi adds.(jiahui.huang@wsj.com; @ivy_jiahuihuang)

Asian stocks wobbled at the open Friday as the sharp rebound in global equities over the past week showed signs of losing momentum.

Indexes opened lower in South Korea and Japan, while Australia edged higher as equities struggled for direction following the US Thanksgiving holiday. A gauge of global stocks was flat, but remained on course for its best week since June as investors cheered signs of Federal Reserve interest-rate cuts.

Chinese stocks will be in focus after JPMorgan Chase & Co. raised its recommendation to “overweight,” stating that the prospect of large advances next year outweighs the risk of significant losses.

Global stocks have gained this week as investors firm up bets on a Fed easing, with futures pricing in roughly an 80% chance of a quarter-point cut next month and leaning toward three more by the end of 2026. Equities have now almost erased their November losses after concerns over frothy AI valuations triggered a selloff earlier in the month.

The rally in equity markets is likely to broaden outside the US, said Goldman Sachs Group Inc. strategist Peter Oppenheimer in an interview on Bloomberg TV. He anticipated further Fed easing but added that there is limited upside for stocks overall “because valuations are reasonably high.”

Meanwhile, the yen was little changed against the dollar after Tokyo’s inflation held steady in November, keeping the Bank of Japan on track for an interest-rate hike in coming months.

The data, a leading indicator for national price trends, are likely to instill confidence in the BOJ that the probability of its economic outlook being realized is rising. The figures may give traders’ bets on a December interest rate-hike another boost after such speculation mounted recently.

In other corners of the market, oil headed for the longest run of monthly losses in more than two years, as traders looked ahead to an OPEC+ meeting this weekend and gauged US-led efforts to end the conflict in Ukraine.

Cash trading resumed in Treasuries Friday with the yield on the benchmark 10-year rising more than one basis point to 4.01%.

A rally in Treasuries cooled on Wednesday, with the 10-year yield at 4%, as fresh US labor market data came in stronger than expected.

Treasuries had gained since last week after delayed September jobs data painted a mixed picture. They then picked up steam on Friday after New York Fed President John Williams signaled he sees room for a rate reduction “in the near term” due to labor market softness.

Also in the spotlight Friday are Chinese property developers.

China Vanke Co. was rejected by at least two large local banks as it tried to secure a short-term loan to quell the default fears that have fueled a plunge in its bonds this week, according to people familiar with the matter.

By Joe Wallace

A rebound in AI-related stocks continued Thursday, while U.S. markets were closed for Thanksgiving after major indexes built momentum heading into the holiday.

Asian markets broadly rose, especially in Japan, where tech investor SoftBank Group led the way after steep recent losses. Chip stocks Advantest and Tokyo Electron added more than 4% and 3%, respectively.

Analysts said U.S. efforts to dial down tensions between Tokyo and Beijing, reported by The Wall Street Journal, may have contributed to broad gains. Both the Nikkei 225 and South Korea's Kospi have added more than 3% in three straight sessions of advances, bringing them closer to record peaks hit in recent weeks.

In China, plans by a major property developer to postpone repaying debt weighed on the CSI 300 index. China Vanke, one of the few major real-estate companies not to default in the recent bust, is seeking to delay payment on a 2 billion yuan note, equivalent to around $282.5 million, due in December. Vanke's shares and bonds dropped sharply on Thursday.

Europe's regional Stoxx 600 benchmark was broadly flat. In London, the FTSE 100 slipped after gaining in the previous session, when the U.K. finance minister soothed anxious investors with a tax-raising budget that could shore up the nation's shaky public finances.

In Germany, shares in Puma surged after Bloomberg News reported that China's Anta Sports was among the companies exploring a potential bid for the sneaker maker.

U.S. stock and bond markets were closed but will reopen for a shortened trading day on Friday. Futures tied to the S&P 500 were little changed after the index posted four straight gains through Wednesday. The rally has reduced losses made earlier in the month as worries about an artificial-intelligence bubble weighed on stocks.

In another sign of easing nerves, the Cboe Volatility Index, a gauge of expected swings in stocks, has retreated over the past week. Mounting expectations that the Federal Reserve will cut interest rates next month have also contributed to the recovery.

Write to Joe Wallace at joe.wallace@wsj.com

By Joe Wallace

A rebound in AI-related stocks continued Thursday, while U.S. markets were closed for Thanksgiving after major indexes built momentum heading into the holiday.

Asian markets broadly rose, especially in Japan, where tech investor SoftBank Group led the way after steep recent losses. Chip stocks Advantest and Tokyo Electron added more than 4% and 3%, respectively.

Analysts said U.S. efforts to dial down tensions between Tokyo and Beijing, reported by The Wall Street Journal, may have contributed to broad gains. Both the Nikkei 225 and South Korea's Kospi have added more than 3% in three straight sessions of advances, bringing them closer to record peaks hit in recent weeks.

In China, plans by a major property developer to postpone repaying debt weighed on the CSI 300 index. China Vanke, one of the few major real-estate companies not to default in the recent bust, is seeking to delay payment on a 2 billion yuan note, equivalent to around $282.5 million, due in December. Vanke's shares and bonds dropped sharply on Thursday.

Europe's regional Stoxx 600 benchmark was broadly flat. In London, the FTSE 100 slipped after gaining in the previous session, when the U.K. finance minister soothed anxious investors with a tax-raising budget that could shore up the nation's shaky public finances.

In Germany, shares in Puma surged after Bloomberg News reported that China's Anta Sports was among the companies exploring a potential bid for the sneaker maker.

U.S. stock and bond markets were closed but will reopen for a shortened trading day on Friday. Futures tied to the S&P 500 were little changed after the index posted four straight gains through Wednesday. The rally has reduced losses made earlier in the month as worries about an artificial-intelligence bubble weighed on stocks.

In another sign of easing nerves, the Cboe Volatility Index, a gauge of expected swings in stocks, has retreated over the past week. Mounting expectations that the Federal Reserve will cut interest rates next month have also contributed to the recovery.

Write to Joe Wallace at joe.wallace@wsj.com

By Jiahui Huang

China Vanke's proposal to delay repayment of an onshore bond led to trading halts in three other local notes and triggered a selloff in Chinese property developers, ratcheting up fears about the country's drawn-out real-estate crisis.

Vanke, one of China's biggest real-estate companies, was once regarded as among the country's most solid developers. It is among the few Chinese major developers that has yet to default amid the country's massive property bust.

In a filing late Wednesday, the company said it is seeking to delay payment of the principal on a 2 billion yuan ($282.5 million) medium-term note due Dec. 15.

The move sparked a broad selloff in the bond and equity markets. Some of Vanke's onshore bonds dropped by more than 30%, triggering trading halts in Shenzhen. Chinese real-estate stocks fell sharply in Hong Kong, with the Hang Seng Mainland Properties Index, a gauge of developers listed in the city, dropping as much as 2.1% in early trading Thursday.

Shares of China Vanke slid as much as 8.5% in Hong Kong, hitting a record low before paring the losses to 4.4% by midday. Shimao Group led the decline among other property stocks, dropping 4.8%. Longfor Group fell 2.1% and Agile Group shed 1.3%. The benchmark Hang Seng Index rose 0.3%.

Vanke's surprise request to delay repayment on local debt highlights the continuing cash-flow uncertainties facing Chinese developers and has spurred more questions about the continued spread of the real-estate downturn. China's property sector, once a driver of the country's economic growth, has been in a yearslong slump, with many major property developers suffering liquidity crises and defaulting on their debts.

"Vanke's proposed delay in repayment reflects the firm's lingering liquidity crunch, which weighs heavily on its debt-servicing capabilities," Morningstar analyst Jeff Zhang said.

The developer, a top property pick among many analysts, been getting support from state-owned Shenzhen Metro Group amid the sector crisis. About one-third of Vanke's shares are held by the rail operator. In early November, Vanke said it could borrow up to 22 billion yuan from Shenzhen Metro before June 30, 2026, with 2.29 billion yuan still available for withdrawal.

The lynchpin is the negotiation with bondholders, who will likely require higher interest rates and additional pledges for the extension, Zhang said.

"If the negotiation falls through, we foresee significant deterioration in investors' sentiment on China property sector, as Vanke is expected to remain safe from defaults," Zhang said.

That said, Zhang thinks China's central and local governments would aim to contain the spillover effects of Vanke's troubles, so they may intervene by facilitating the agreement with major creditors.

Earlier this month, S&P Global Ratings downgraded China Vanke's credit rating further into junk territory, to CCC from B-minus, saying the company's financial commitments appear to be unsustainable.

The ratings company in its report said Vanke's contracted sales between January and October have shrunk by about 43% from a year earlier, weaker than its previous expectation of a 40% drop for the full year. In 2026, it estimated that the company's contracted sales could slip further to 103 billion yuan.

"China Vanke could default on its debt obligations if it does not receive timely and sufficient loans from its largest shareholder, Shenzhen Metro," S&P Global Ratings said.

Write to Jiahui Huang at jiahui.huang@wsj.com