Sunday, October 17, 2021

Evergrande stock trading suspended as debt testing approaches

On October 4, trading in shares of China’s troubled real estate giant Evergrande was suspended on the Hong Kong Stock Exchange (HKEX) after the indebted developer missed an interest payment deadline and continued its efforts to repay investors. kept.

A regulatory filing (PDF) with HKEX said, “The trade suspension came ahead of an internally informed announcement about a major transaction.”

The company’s shares have fallen nearly 80 percent to HK$2.95 per share from HK$14.14 since the beginning of this year. Share trading of its asset management arm Evergrande Property Services was also suspended, a separate regulatory filing (PDF) showed.

Hong Kong’s Hang Seng index fell 2.2 percent after Evergrande’s suspension, while Tokyo’s Nikkei 225 fell 1.1 percent. Taiwan shares fell 1 percent. Markets were closed in Shanghai and South Korea for the holidays.

Last month, Evergrande recalled required interest payments of $83.5 million and $47.5 million to international bondholders on September 23 and 29, respectively.

However, the company’s silence on its interest payment obligations has made investors wonder whether they will have to recognize significant losses when the 30-day grace period expires, raising the possibility of a massive default in October.

Investors are grappling with the unknown, including what the Communist Party regime might do in response. S&P Global Ratings has predicted a bailout is unlikely, claiming Evergrande is “not too big to fail.”

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As the largest property developer by sales, Evergrande currently owns 1,300 projects in over 280 cities in China. In addition, the property giant’s business has expanded to theme parks, electric vehicles, financial services and a soccer team.

Evergrande is struggling to keep debt from defaulting as it liquidates assets to address a cash crunch. The company owes banks, customers and contractors billions of dollars.

With liabilities of $305 billion, equivalent to 2 percent of the country’s annual gross domestic product (GDP), Evergrande has raised concerns that its crisis could spread through the financial system and resonate around the world.

The problem extends beyond Evergrande’s debts. China’s vast real estate sector, which contributes 29 percent of the country’s GDP, is so built-up that it threatens to abandon its old role as a major driver of Chinese economic growth and, instead, But a pressure builds up.

Home prices in China have risen over the past 15 years, often by more than 10 percent annually in major cities. Yet developers have borrowed a considerable amount in the process. Wall Street bank Morgan Stanley said the industry’s total debt is about $2.8 trillion.

Reuters and Dorothy Lee contributed to this report.

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This News Originally From – The Epoch Times

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