Trading shares of the seriously indebted Evergrande was brought to a halt on Monday. According to the Hong Kong Stock exchange, shares of the property giant’s unit Evergrande Property Services Group were also ordered to be suspended. It refused to provide details about the reasons for the suspension or the authority that imitated the suspension orders.
The Chinese property developer missed a second important interest payment a few days prior to the orders of suspension of its shares trading at the Hong Kong stock exchange.
Evergrande’s liabilities soar to 2pc of China’s GDP
Evergrande has liabilities equal to 2% of China’s gross domestic product. Hence, its inability to pay off its debts has caused fears of contagion which could derail the second largest economy in the world. These worries have subsided to an extent after Beijing’s central bank vowed that it would protect homebuyers’ interests.
The suspension of share trading caused nervousness amongst the broader financial markets as concerns of Evergrande’s woes spreading through the financial system exacerbated yet again. As a result, the Chinese Yuan fell lower in offshore markets, impacting the Hang Seng benchmark index as well. Guangzhou R&F Properties Co Ltd plunged 7%, Sunac China Holdings and Country Garden both dropped 4%.
Evergrande’s shares have dropped 80% to date and its property services unit has plunged 43% while the group tries to raise funds it needs to pay off its lenders and suppliers. The Group’s electric vehicle unit China Evergrande New Energy Vehicle Group dropped to around 8% on Monday before it was able to trim some of its losses.
The heavily indebted group reported on Sept.30 that its wealth management unit had already paid 10% repayment of wealth management products (WMPs), that are mostly owned by onshore retail investors, which were due on the same date.
Evergrande was considered to be China’s top property developer which is now expected to become part of one of the largest restructurings in the country. The group has prioritized its domestic creditors over the offshore bondholders.
Bondholders said the company has failed to pay two of its offshore payments and missed their deadlines. The company has offshore debt amounting to around $20 billion and has deadlines coming up on dollar bond coupon payments worth $162.38 million.
Experts told Reuters that China is encouraging government-owned firms and state-backed property developers to buy some of the assets owned by Evergrande.
