Evergrande shares plunge on market return as deal falls through

An exterior view of China Evergrande Centre in Hong Kong March 26, 2018. — Reuters pic
An exterior view of China Evergrande Centre in Hong Kong March 26, 2018. — Reuters pic

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BEIJING, Oct 21 — Shares in Chinese property giant Evergrande plunged on Thursday after resuming trading in Hong Kong, with the failure of a unit sale deal deepening fears the indebted company will collapse.

Evergrande suspended trading on October 4 pending an announcement on a "major transaction" as it struggled with some US$300 billion (RM1.2 trillion) of debt — with investors worried the fallout from its predicament could impact the wider Chinese economy.

On Thursday, its shares plunged 10.5 per cent at the open, after the group said the evening before it had applied for a trading resumption.

A deal worth HK$20.04 billion to sell a 50.1 per cent stake in its property services arm had fallen through, it added in a separate statement.

The buyer in talks with Evergrande was reportedly a unit under Hong Kong real estate firm Hopson Development Holdings.

Evergrande said it would continue to implement measures to ease its liquidity issues, cautioning that "there is no guarantee that the group will be able to meet its financial obligations".

The Shenzhen-based company has missed several payments on dollar-denominated bonds.

A 30-day grace period on an offshore note is up on Saturday.

Tight market

The group first listed in Hong Kong in 2009, raising HK$70.5 billion in its initial public offering — making it China’s largest private real estate company and founder Xu Jiayin the mainland’s richest man with a net worth of 42.2 billion yuan.

In an expansion spree Xu — also known as Hui Ka Yan in Cantonese — bought the then-embattled Guangzhou football team in 2010, renaming it Guangzhou Evergrande and pouring money into world-class players and coaches.

But Evergrande started to falter under the new "three red lines" imposed on developers in a state crackdown in August 2020 — forcing the group to offload properties at increasingly steep discounts.

Fears that the firm could collapse and send shockwaves through the Chinese economy rattled markets earlier this month — though Beijing has insisted any fallout would be containable.

Evergrande’s announcements came as China’s new-home prices fell for the first time in six years last month, with the property sector struggling after a government clampdown.

Several domestic property rivals have in recent weeks already defaulted on debts and have seen their ratings downgraded.

Hong Kong-listed Sinic Holdings became the latest to miss a payment, while mid-sized competitor Fantasia also failed to meet obligations in recent weeks. — AFP

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