(Yicai Global) March 4 -- Shares in Country Garden Holdings and Midea Real Estate Holding both advanced in Hong Kong today, despite an overall slide in the broader market, after the two Chinese property developers said that they had been granted a combined quota of CNY21 billion (USD3.3 billion) in merger and acquisition loans.

Country Garden’s share price [HKG:2007] closed up 6.12 percent at HKD6.07 (USD0.80). Earlier in the day it had soared 8.3 percent to HKD6.20. Midea Real Estate’s stock [HKG:3990] closed down 0.69 percent at HKD11.52 (USD1.50), but earlier in the day it had surged 5.6 percent to HKD12.26.

Country Garden has been given a financing quota of CNY15 billion (USD2.4 billion) for real estate M&As from China Merchants Bank, the Foshan, southern Guangdong-based province said in a filing to the Hong Kong bourse today.

Midea Real Estate was granted a CNY6 billion (USD949.4 million) M&A loan quota from the same bank, it said on its WeChat account yesterday. The fellow Foshan-based developer has yet to inform the stock exchange.

They are the first two private developers to secure such loans since regulators said in late 2021 that the government will step up support for reputable developers to conduct M&As from large companies that are in financial difficulty. Previously most such loans went to state developers.

Property firms raised CNY3.8 billion (USD601.5 million) through the issuance of M&A debts in January and February, according to incomplete statistics from real estate researcher China Index Academy. Over that period, lenders provided a CNY53 billion (USD8.4 billion) quota for M&A loan financing, but there were only a handful of successful cases.

State developers don’t have a high success rate with M&As despite strong funding and a high degree of willingness, property researcher China Real Estate Information Corp said. "During the M&A peak period of 2017 to 2018, for example, state developers lagged behind their private peers significantly in terms of the number of successful M&A cases," it added.

As a result, the issuance of more M&A loans to private developers should be beneficial to the industry, some market players said. But given the fact the real estate market is still lukewarm, there is unlikely to be an M&A frenzy.

"It is not easy for large-scale real estate M&A activities to materialize amid a cooling market and tight financing environment," EH Consulting said in a research note.

Editors: Tang Shihua, Kim Taylor