Chinese giant Evergrande suspends operations on the Hong Kong stock exchange

Published on : 04/10/2021 – 08:18

The ultra-indebted Chinese real estate giant Evergrande suspended its financial operations on the Hong Kong Stock Exchange on Monday, October 4, without giving any reason. “Trading in the shares of China Evergrande Group will be halted,” the group announced on the stock exchange. “As a result, trading of all structured products relating to the company will be halted at the same time.”

The company’s stock price has fallen about 80% since the start of the year. Strangled by a debt of 260 billion euros, the private group has been struggling for several weeks to honor its interest payments and deliveries of apartments.

A media outlet said Monday that the Chinese real estate company Hopson Development Holdings was planning to acquire 51% of the shares of Evergrande Property Services Group for more than 40 billion Hong Kong dollars (4.43 billion euros).

Patrick Wong, analyst at Bloomberg Intelligence, said the suspension could have something to do with a major asset divestiture or a capital restructuring. But the juggernaut remains on the brink and its potential bankruptcy could rock the Chinese real estate sector, or even the national or global economy.

Shares in its electric vehicle subsidiary, which last week backed out of a Shanghai listing offer, were not suspended, although they fell 6% in early trading.

The Hong Kong Stock Exchange fell more than 2% Monday morning, after losing 0.39% at the opening, or 96.96 points. Evergrande has already started to shed some assets and the group has announced that it wants to sell a stake of 1.5 billion dollars (1.3 billion euros) in a regional bank.

Potential collapse

Faced with the risk of social unrest in the event of Evergrande defaulting on payment, the Chinese government has not yet indicated whether it intends to intervene or not to help or restructure the promoter. According to news reports, authorities have asked local governments to prepare for the potential collapse of the real estate giant, which suggests a major state bailout is unlikely.

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China’s central bank last week called on financial institutions to “stabilize land and house prices” and “not to use real estate as a means of stimulating the economy in the short term.” She also stressed that “housing is used for housing, not for speculation”. The summary of the meeting, held with the banking and insurance regulator, does not specifically mention Evergrande.

But it is a signal that the authorities are worried about the repercussions of a possible bankruptcy of the developer on the real estate sector, already battered in recent months by a regulatory tightening intended to curb debt. Hundreds of people have demonstrated in recent weeks in front of Evergrande offices in several regions of the country to demand the completion of the work or the reimbursement of sums already paid.

The group admitted facing “unprecedented challenges” and warned that it may not be able to meet its commitments. The group hired restructuring experts, including Houlihan Lokey who had advised Lehman Brothers.

With AFP