Evergrande shares trading was halted after the Hong Kong court issued orders for liquidation. China’s Evergrande shares were pulled up after plunging over 20% in early trading on Monday after a Hong Kong court ruled to liquidate the embattled property developer. This Evergrande’s crisis has raised concerns in China’s financial markets as policymakers try to contain the situation. It comes against the backdrop of a spiraling debt crisis in the country.
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Evergrande shares stopped trading
China Evergrande, which was once one of China’s largest property developers, has in the last few years been enveloped in Beijing’s debt crisis. Trading in China Evergrande shares, China Evergrande New Energy Vehicle Group shares, and Evergrande Property Services shares were halted. The benchmark Hang Seng Index was up 1.2%.
Matt Simpson, Senior Market Analyst, City Index, Brisbane said, “I think the bigger surprise here is that it took so long for Evergrande to be liquidated. Clearing out the deadwood should be seen as a positive, but I doubt it will boost confidence in the property sector on this news alone.”
The Wall Street Journal earlier reported that Evergrande’s overseas creditors failed to reach an 11th-hour deal this weekend to restructure, which could mean an imminent liquidation for the real estate developer.
Evergrande’s crisis
China’s Evergrande group debt has made it the world’s most indebted property developer, which defaulted in 2021. Then announced an offshore debt restructuring program in March last year.
Containing the contagion Policymakers in China have been scrambling to stem the debt crisis in the beleaguered property sector.
Last week, the People’s Bank of China and the Ministry of Finance announced measures to help boost the liquidity available to property developers.
The measures, which will be valid until end of this year, will help ease a lingering cash crunch for Chinese developers after Beijing cracked down on the sector to address bloated debt levels in real estate.
China’s challenging property sector
The property sector in China still remains challenging against the backdrop of the Evergrande news, according to Alexander Cousley, APAC investment strategist at Russell Investments.
“I think the measures have to be much more targeted and much more forceful,” said Cousley.
Evergrande’s crisis set off contagion fears that China’s property sector troubles could spill over to other parts of the world’s second largest economy.
Country Garden, also one of China’s largest developers, has been struggling to pay off its own debt. However, the developer reportedly said last month that it may avoid a default on its yuan-denominated bonds.
Evergrande debt
Evergrande defaulted on offshore debt in late 2021, becoming a symbol of the debt crisis that has engulfed China’s property sector. The world’s most indebted developer has around $300 billion of liabilities and $240 billion of assets.
