Shares of Chinese giant Evergrande plunge on return to the stock market

Shares in Chinese real estate giant Evergrande fell sharply as it returned to the Hong Kong Stock Exchange on Thursday after a nearly three-week suspension on reports of the failure of the sale of its property services unit.

Evergrande suspended its trading on October 4 as it faced $ 300 billion in debt, amid investor fears about the impact a potential bankruptcy would have on the Chinese economy.

At the close of the session, their titles lost 12.5% ​​on the Hong Kong stock market. Since the beginning of the year, the value of its shares has depreciated more than 80%.

Along with the resumption of its stock market operations, the conglomerate had announced on Wednesday the collapse of the agreement to sell 50.1% of its unit Evergrande Property Services Group, for a value of US $ 2,580 million.

The prospective buyer was a unit of Hong Kong real estate firm Hopson Development Holdings which, in a stock exchange communication, “regretted to announce that the seller failed to complete the sale”.

Unlike Evergrande, its shares rose 7.5% on the Hong Kong stock exchange.

Evergrande said it would continue to take steps to alleviate its cash flow problems, but cautioned that “there are no guarantees that the group can meet its financial obligations ”.

In a stark verification of the current state of its businesses, the real estate giant acknowledged that it has sold only 405,000 square meters of properties between September and October, a theoretically busy season.

Contracts for the sale of real estate totaled 3.65 billion yuan (about US $ 571 million) against 142 billion yuan in the same period last year.

The Shenzhen-based company, south China, has already defaulted on several dollar bonds, and the 30-day grace period for an offshore bond expires on Saturday.

“A bankruptcy of the payment would not be a surprise”Said the analyst Chen Long, from the Plenum firm in Beijing. In fact, “the surprise would be to see that Evergrande complies with its refund”He added.

“Contagion”

The group went public in Hong Kong in 2009, raising US $ 9 billion in its initial public offering, making it the leading private real estate company in Hong Kong. China and its owner, Xu Jiayin, the richest man in the country.

The group entered the world of football, with the purchase in 2010 of the Guangzhou team, but also tourism, food, insurance, health or electric vehicles in an expansionist debt-based frenzy.

However, the consortium began to suffer from the controls imposed by Beijing in August 2020 on real estate developers to contain its indebtedness and was forced to sell at sharply reduced prices.

There is concern about how the collapse of the company could affect the Chinese economy, whose growth slowed more than expected in the third quarter, according to data released the previous week.

Sign of the bad moment of the sector, the value of houses sold in September fell by 16.9 year-on-year in September, which also registered a fall in prices of new houses in China for the first time in six years.

Several local real estate rivals have defaulted on their debts in recent weeks, and their scores have been lowered.

“Contagion is emerging in various parts of China’s construction sector, triggered by problems at Evergrande and compounded by credit issues from other developers.Analysts at Fitch Ratings said in a report Thursday.

“Market volatility has weakened prospects for a short-term refinancing and exacerbated liquidity pressure from developers with weak credit profiles.”He added.