The shares of the Chinese group Evergrande, one of the country’s real estate giants, registered a significant drop on Thursday (21) in the return to the Hong Kong Stock Exchange, after a suspension of almost three weeks, after information about the failure of the sale of your property services unit.
Evergrande suspended trading on the stock exchange on Oct. 4, when it faced $300 billion in debt, amid investor fears about the impact a possible bankruptcy would have on China’s economy.
On their return, the bonds operated at a drop of more than 10% in Hong Kong.
Along with the resumption of trading on the stock exchange, the conglomerate on Wednesday announced the failure of the deal to sell 50.1% of its Evergrande Property Services Group unit for $2.58 billion.
The potential buyer was a unit of the real estate group of Hopson Development Holdings (Hong Kong), which, in a statement sent to the Exchange, “regretted to announce that the seller was unable to complete the sale”.
Unlike Evergrande’s assets, Hopson shares advanced more than 12% on the Hong Kong Stock Exchange.
Evergrande said it would continue to take measures to alleviate liquidity problems, but warned that “there are no guarantees that the group will be able to meet its financial obligations.”
In a statement of the current state of its business, the real estate developer acknowledged that it 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 (US$571 million), against 142 billion yuan for the same period in 2020.
The company based in Shenzhen, southern China, has already defaulted on several dollar bonds, and on Saturday the 30-day grace period for an offshore bond expires.
– “Contagion” –
The group began listing in Hong Kong in 2009, when it raised $9 billion in its initial public offering, making it China’s leading privately-owned real estate company and its owner, Xu Jiayin, the richest man in the country.
Xu expanded his interests with the purchase of Guangzhou football club in 2010, which changed its name to Guangzhou Evergrande, and invested in high-profile players and coaches.
But the conglomerate began to suffer from controls imposed by Beijing in August 2020 on property developers to curb its debt and was forced to sell at greatly reduced prices.
The market is concerned about the consequences of the company’s possible collapse on the Chinese economy, which saw growth decelerate more significantly than expected in the third quarter.
A sign of the industry’s downturn, September home sales fell by 16.9% year-on-year in September, which also saw new home values in China fall for the first time in six years.
Several local real estate competitors have failed to pay their debts in recent weeks and have seen their ratings reduced.
“Contagion is emerging in various parts of China’s construction sector, triggered by Evergrande’s problems and compounded by the credit issues of other developers,” analysts at Fitch Ratings said in a report released on Thursday.
“Market volatility weakened the prospects for a short-term refinancing and increased the liquidity pressure of incorporated companies with fragile credit profiles”, completes the text.
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