As Evergrande scrambles to raise funds to pay off debt, regulators are warning of broader risks to China’s financial system.
Evergrande shares fell as much as 19 percent to their lowest level in more than 11 years on Monday, extending losses as investors frown on its trading prospects with a fast-approaching deadline for debt obligations. pay this week.
By noon, the stock had touched HK $ 2.06 ($ 0.26), the weakest level since May 2010.
The company’s property management unit fell more than 12 percent, while its electric car unit declined 8 percent. Evergrande’s majority-owned movie streaming company Hengten Net plunged 14 percent.
Evergrande has been struggling to raise funds to pay off its many lenders, suppliers and investors, and regulators have warned that its $ 305 billion of liabilities could pose broader risks to the country’s financial system if not stabilized.
One of Evergrande’s top lenders has made provisions for losses on a portion of its loans to the conflicting developer, while some creditors plan to give it more time to pay, four bank executives told Reuters news agency.
The developer said Sunday that it has begun reimbursing investors in its real estate wealth management products.
Policymakers are telling Evergrande’s top lenders to extend interest payments or refinance loans, and market watchers are largely of the opinion that a direct government bailout is unlikely.
Evergrande will pay $ 83.5 million in interest on September 23 on its March 2022 bond. It has another interest payment of $ 47.5 million due on September 29 for the March 2024 notes. Both bonds would be in default if Evergrande does not pay interest within 30 days of the scheduled payment dates.
In any default scenario, Evergrande will need to restructure the bonds, but analysts expect a low rate of recovery for investors. Trading in the company’s bonds highlighted how drastically investors’ expectations of its outlook have deteriorated this year.
The March 2022 8.25 percent dollar bond traded at 29.156 on Monday afternoon, yielding more than 500 percent, compared with about 13.7 percent earlier in the year. The March 2024 bond of 9.5 percent was at 26.4 percent, yielding more than 80 percent, compared to 14.6 percent in early 2021.
Goldman Sachs said last week that because Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, recoveries in a potential restructuring could differ between the two sets of bonds, and any potential restructuring processes. it could be prolonged.
The company’s woes also put pressure on the real estate sector in general, as well as the yuan, which fell to a three-week low of 6.4831 per dollar in foreign trade.
Faced with uncertainty about the number of economic consequences President Xi Jinping is willing to accept as he moves forward with market-altering campaigns to achieve “common prosperity” and control over-indebted companies, many investors choose to sell first and ask questions. after.
The Hang Seng Property Index fell 6.6 percent, the most since May 2020. Henderson Land fell 12 percent. Sun Hung Kai Properties Ltd fell 9.1 percent, set for its biggest loss since 2016. CK Asset Holdings Ltd fell 7.9 percent.
Chinese officials told Hong Kong developers that Beijing is no longer willing to tolerate what it calls monopoly behavior, Reuters reported on Friday. Officials did not set a roadmap or deadline, according to the report, which cites unidentified developers.
“This is a paradigm shift,” said Hao Hong, chief strategist at Bocom International, referring to the Reuters report. “People need to be vigilant.”