Evergrande trade halt in China spurs speculation on asset sale

0


[ad_1]

  • Trading in Evergrande, Evergrande Property Services stopped
  • Chinese property developer Hopson’s shares also suspended
  • The nerves of the wider market are rekindled, the offshore yuan slips

HONG KONG, Oct. 4 (Reuters) – Shares of struggling developer China Evergrande (3333.HK) and its profitable property management unit were suspended Monday in Hong Kong, sparking speculation about a possible divestment of assets from the company running out of cash.

Once the best-selling developer in China, Evergrande faces what could be one of the country’s most significant restructurings as the debt crackdown prevents it from refinancing $ 305 billion in liabilities.

The Hong Kong Stock Exchange has given no reason for the suspension of Evergrande or shares of its Evergrande Property Services Group (6666.HK) unit and it is not known who initiated the suspension. Evergrande did not immediately respond to a request for comment.

But speculation quickly turned into asset sales and this move also appeared to reignite market concerns about the risk of contagion or blow to the Chinese real estate sector and the economy in general if Evergrande collapses or is liquidated at bargain prices.

“Looks like the property management unit is the easiest to sell in the grand scheme of things, indicating that the company is trying to generate short-term liquidity,” said Ezien Hoo, OCBC analyst.

“I’m not sure that necessarily means the business has given up on surviving, especially since selling an asset means they’re still trying to raise money to pay the bills.”

Beijing has prompted state-owned companies and state-backed real estate developers to buy some of Evergrande’s assets, people with knowledge of the matter told Reuters last week.

Chinese real estate group Hopson Development (0754.HK) said in a statement Monday that it had suspended trading in its shares, pending an announcement on a major acquisition of a Hong Kong listed company and a possible compulsory offer.

It was not clear whether the deal was tied to the Evergrande group and Hopson did not respond to a request for further comment. However, Hopson is well positioned relative to other real estate developers, owning more assets than liabilities, improving its profits in the first half and paying a dividend.

Hopson shares, which have a market value of HK $ 60.4 billion ($ 7.8 billion), have jumped 40% so far this year and were rated B + by Fitch in June.

The Evergrande property development unit was also profitable in the first half of 2021 and turnover is up compared to the previous year.

NERVOUSNESS

With a liability equal to 2% of China’s gross domestic product, Evergrande has raised concerns that its woes will spill over into the financial system and reverberate around the world.

Initial concerns eased somewhat after China’s central bank pledged to protect the interests of homebuyers, but the ramifications for the Chinese economy have kept investors on the lookout.

Monday’s suspension of stock trading sent shivers down the offshore yuan, which fell about 0.3% against the dollar, and weighed on the benchmark Hang Seng (.HSI), especially the financial and other developers.

“(The) consensus expects restructuring, but authorities are limiting Evergrande’s systemic risk,” Bank of Singapore analyst Moh Siong Sim said. But there is “a little nervousness”, he added.

Guangzhou R&F Properties Co Ltd (2777.HK) fell 6%, while shares of Sunac China Holdings (1918.HK) and Country Garden (2007.HK) came under pressure before cutting losses. Shares of Evergrande’s electric vehicle unit (0708.HK) rose by more than 10%.

Evergrande shares have plunged 80% so far this year, while its bonds are trading at troubled levels. Shares in its real estate services unit have fallen 43% as the group scrambles to pay its many lenders and suppliers.

The cash-strapped group said last month it had negotiated a settlement with some domestic bondholders and made a repayment on some wealth management products, largely held by Chinese retail investors.

Holders of the company’s $ 20 billion offshore debt appear further down the line and bondholders have said interest payments owed on the bonds in recent weeks were not arrived.

Evergrande faces deadlines for dollar bond coupon payments totaling $ 162.38 million next month.

($ 1 = 7.7868 Hong Kong dollars)

Reporting by Anne Marie Roantree and Donny Kwok; Additional reporting by Tom Westbrook in Singapore; Editing by Kenneth Maxwell and Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

[ad_2]

Share.

Leave A Reply