Unhappy return for Chinese developer Evergrande Group

The stock market value of China Evergrande Group has tumbled after the Hong Kong market ended a 17-month suspension of the stock.

Tthe China Evergrande Centre in Hong Kong. Picture: AFP

The stock market value of China Evergrande Group tumbled yesterday after trading in its shares restarted for the first time in more than a year.

The Chinese property developer’s shares plummeted by 90 per cent after the Hong Kong market opened with the ending of a 17-month suspension of the stock.

Evergrande’s shares recovered slightly in the afternoon to record a fall of 79 per cent on the day. The company’s market capitalisation fell to $HK4.6 billion from $HK21.8 billion ($4.3b).

Creditors are in talks with the group about restructuring its debts, but Evergrande said that a meeting to agree terms yesterday had been pushed back to September 26. It said it was “crucial” for all creditors to “understand the process of the proposed restructuring and the terms”. Creditors representing more than 75 per cent of each class of debt will need to approve a proposal that will swap their debt for new bonds and equity instruments.

A woman leaves the China Evergrande Centre in Hong Kong. Picture: AFP

Evergrande, one of China’s largest housebuilders, recently filed for bankruptcy protection in the United States to shield its assets during the restructuring of its liabilities. Two years ago it nearly collapsed under the weight of debts reaching about dollars 340 billion, equivalent to about 2 per cent of China’s entire GDP.

The company has $US19bn in international market bonds and its troubles two years ago rattled global markets. Analysts feared the disruption could prompt a rerun of the American sub-prime mortgage crisis that caused the 2008 financial crash.

At one point Evergrande provided homes for 12 million Chinese families and it has expanded into areas such as electric cars and football.

Steven Leung, a Hong Kong-based director of UOB Kay Hian, a Singapore-based broker, said: “There’s little hope that Evergrande can rely on selling houses to repay debt because homebuyers would prefer state-owned developers and it won’t be able to benefit from stimulus policies.”

Evergrande is facing more than 2,000 legal cases over unpaid loans and delayed construction projects. It says it is “actively communicating with relevant creditors” to resolve the disputes.

The group’s financial issues led to other builders missing debt repayments and it has been estimated that companies accounting for 40 per cent of the country’s home sales have defaulted since 2021. Country Garden, another large Chinese property developer, recently missed payments on its international bonds and its share price fell by almost 20 per cent.

THE TIMES