by Jason Xue and Tom Westbrook

SHANGHAI/SYDNEY (Reuters) – Stocks and bonds in China’s real estate industry fell to near eight-month lows on Monday as repayment worries at the country’s two biggest developers plunged confidence in the sector into a deeper crisis.

The cash crunch at veterans Country Garden and Dalian Wanda shows that funding problems have reached the level that many had hoped would be the biggest and safest players in a business that once contributed a quarter of China’s GDP and has now shut down entirely.

Doubts are growing that official support of any size is forthcoming, and investors are not expecting any help for shareholders.

Shares of Country Garden fell 6% to an eight-month low, and shares of its service arm fell 16%. Country Garden dollar bonds fell to less than a fifth of their face value.

Shares in rival Longfork fell 10%, while asset sales at Wanda failed to revive bond prices as investors waited to see whether the cash actually reached bondholders’ pockets.

“As market sales weaken and policy expectations ease, real estate developers will find it difficult to repay bonds from their own operations,” said Yao Yu, founder of credit analysis firm RatingDog.

“Investors should become more and more pessimistic.”

Property development in China has ground to a halt as government crackdowns on loans and a decline in public confidence have left builders unable to sell apartments or refinance their dues.

Guidelines promoting urban redevelopment published late Friday were seen as small in scale, prompting investors to expect more from this week’s politburo meeting. However, the big names were struggling, which exposed the depth of the problems.

The Mainland Developers’ Index fell 5.5% on Monday and was headed for its worst session of 2022.

“Everything is collapsing,” said a debt fund manager in Hong Kong who asked not to be named.

“The major thing we’re seeing now is that onshore-traded country garden bonds are going down,” he said. “He’s the biggest. If he doesn’t survive, people get scared.”

new shocks

Country Garden is a huge company with thousands of projects in nearly 300 Chinese cities. Its move to refinance a 2019 debt facility has surprised and upset investors, and comes after ratings downgrades and new defaults elsewhere.

Country Garden’s onshore-traded bonds fell to less than half their face value on Monday and bonds due in 2025 and 2031 fell below 20 cents on the dollar.

Wanda, China’s biggest commercial developer, was struggling for cash for one of its subsidiaries to make late coupon payments even before the end of the grace period on July 30. It sold part of another subsidiary to streaming firm China Rui for $320 million, which a source familiar with the matter said would help it repay a separate $400 million bond.

State-backed developer Greenland Holdings has defaulted on repayments this month, while Sino-Ocean Group has offered extended terms for a 2 billion yuan ($278 million) bond due on August 2.

Fresh troubles crushed a looming rally when China lifted COVID-19 controls after years of movement restrictions and opened its borders.

Restructuring plans at Evergrande, which was the poster-child of the sector plunging into funding stress in 2021, remain before courts in Hong Kong and the Cayman Islands, while property sales are in the midst of a new slump.

“Bond restructuring of troubled Chinese property developers could buy them some wiggle room,” Fitch Ratings said in a report on Monday. “But if home sales do not recover for a sustained period, most people will continue to face repayment difficulties.”

($1 = 7.1972 renminbi)