China Evergrande Shares Tumble as Trade Resumes Without $2.6 Billion Deal

By Web Staff
Web Staff
Web Staff
October 20, 2021 Updated: October 21, 2021

Shares of China Evergrande Group fell by as much as 13.6 percent on Thursday as trade resumed in the latest blow to the debt-saddled developer, whose woes have rattled global markets.

The development comes after a two-week suspension in trade that started on Oct. 4.

The company announced late on Oct. 20 that it had failed to secure a $2.6 billion deal to sell a 50.1 percent stake in its property services arm to smaller rival Hopson Development Holdings, setting the conditions for a potentially disruptive default.

Evergrande Property Services Group’s stock dropped by as much as 10.2 percent as trading in both companies’ shares resumed.

Since the beginning of the year, the firm’s shares have fallen by almost 80 percent.

Its debt obligations boiled over to crisis point this year, triggered by new central government policies introduced in August last year designed to deleverage China’s property sector. Chinese regulators outlined “three red lines” to cut off new bank loans to what were considered overleveraged developers, according to the new policies, which impacted Evergrande’s cash flow overnight.

It remains to be seen what the immediate implications of an Evergrande default will be the Chinese and global market, with Communist Party politics expected to play a role in determining the speed and extent of the fallout, according to analysts.

According to data compiled by Bloomberg, foreign investment firms BlackRock, UBS, HSBC, and Ashmore Group, are among Evergrande’s largest bondholders, with combined holdings of $1.3 billion.

Evergrande is just one of many highly indebted developers in China’s property sector, meaning that investors in the sector, including any U.S. investors, are exposed to broader risks than just Evergrande’s debt crisis alone.

Reuters contributed to this report.

Web Staff