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Country Garden Loses Its Last Buy Rating From Global Brokerages

2023-08-17 11:53
Country Garden Holdings Co. has lost its last stock buy rating from major international brokerages, as the embattled
Country Garden Loses Its Last Buy Rating From Global Brokerages

Country Garden Holdings Co. has lost its last stock buy rating from major international brokerages, as the embattled Chinese property giant edges ever closer to a maiden public bond default.

Jefferies Financial Group Inc.’s Calvin Leung became the latest analyst to cut Country Garden to a ‘hold’ recommendation, citing a weaker sales outlook in low-tier cities and the lingering risk of a share placement to raise fresh funds.

The downgrade follows a flurry of similar moves by investment banks from JPMorgan Chase & Co. to Morgan Stanley in recent days, as China’s former top developer by sales saw its stock and bonds tumble as a liquidity crisis worsened. The move also coincides with a warning by Country Garden that it faces “major uncertainties” over bond payments, the strongest sign yet that a default may be imminent.

A 75% slump from a January high has made Country Garden a Hong Kong penny stock, shrinking its market value to just $2.8 billion from an all-time high of around $50 billion in 2018. The stock fell as much as 4.8% Thursday morning, after a two-day rebound.

The downbeat view among foreign brokerages stands in contrast to that of their local counterparts, who have mostly held on to a buy rating on Country Garden, a discrepancy often observed for other Chinese stocks as well. Analysts’ average 12-month target price for the stock stands at HK$1.1, representing a 33% upside from Wednesday’s close, according Bloomberg-compiled data.

--With assistance from Kevin Kingsbury.