(Yicai Global) June 14 -- Chinese real estate developers garnered the lowest amount of financing in May since 2020 as market sentiment is low amid poor housing sales despite eased funding rules.

Some 80 property developers raised CNY26.3 billion (USD3.7 billion) last month, down by more than 56 percent from April and over 60 percent lower than a year ago, as the headline sum hit a three-year low, according to real estate data provider CRIC.

Property companies could benefit from financing support to increase their liquidity and boost industry and market confidence amid high risks, industry insiders said. 

Firms in the sector are once again allowed to issue bonds and equity as rules that were tightened earlier to reduce leverage have been eased since last year. However, restoring trust takes time. 

From November 2022 to February 2023, more than 20 developers have disclosed private placement schemes and lately, a few of them are advancing. In late May, the Shenzhen Stock Exchange gave the green light to China Merchants Shekou Industrial Zone Holdings to issue new stock to select investors. Moreover, five others, including CCCG Real Estate, Fuxing Science and Technology, Greattown Holdings, Poly Developments, and Holdings Group, received similar approvals this month.

More firms are seeking to join the group, including Zhuhai-based Huafa Properties and China Vanke. Moreover, Shanghai-headquartered Greenland Holdings is expecting to carry out its next private placement soon, Chairman Zhang Yuliang said in late May. China Enterprise, another Shanghai-based firm, also launched a private placement plan early this month to raise no more than CNY4.5 billion (USD627.8 million).

However, after some companies revealed their equity financing schemes, their stock prices have slumped even more, which narrows the space for refinancing, an insider in the sector told Yicai Global. Last month, shares of almost four-fifths of listed Chinese property companies dropped, and some of the stocks tanked by over 50 percent. The slumps have led the companies to try and protect their share prices, per an employee of one of the potential equity issuers.

The solution to the liquidity problems lies in sales, according to Liu Shui, head of research at the China Index Academy. Housing demand should surge so that financial institutions would have more confidence to support property developers in fundraising, Liu added.

Editor: Emmi Laine