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China’s Evergrande Shares Tumble as Hong Kong Trading Resumes

Shares of Chinese real estate developer Evergrande Group have finally been allowed to show their true colors, reporting an 86.7 percent drop as trading resumed in Hong Kong.
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China’s Evergrande Shares Tumble as Hong Kong Trading Resumes
A worker pusher a cart in front of a sign showing Evergrande Group's China operation at a housing complex by the property developer in Beijing on December 8, 2021. (Photo by Noel Celis / AFP) Photo by NOEL CELIS/AFP via Getty Images
Aldgra Fredly
By Aldgra Fredly
8/28/2023Updated: 8/28/2023
0:00

China’s Evergrande Group tumbled 79 percent in Hong Kong trading on Aug. 28 as shares of the real estate developer resumed trading for the first time since its unexplained suspension in March 2022.

Shares listed in Hong Kong fell to HK$0.35, with its market capitalization shrinking to HK$4.6 billion ($586.29 million) from HK$21.8 billion ($2.78 billion) when it last traded.

The company’s Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, have both resumed trading in the past month after a 16-month halt.

The trade resumption is crucial for the company because its offshore debt restructuring plan includes swapping part of the debt into equity-linked instruments backed by them. Evergrande would have been delisted if the suspension had gone beyond 18 months.

In its filing to the Hong Kong Stock Exchange (pdf), Evergrande posted a 33 billion yuan ($4.5 billion) loss attributable to shareholders for the first six-month period, less than the 66 billion yuan ($9 billion) loss reported last year.
A woman cries as she and other people gather at the Evergrande headquarters in Shenzhen, southeastern China, on Sept. 16, 2021, as the Chinese property giant said it's facing "unprecedented difficulties" but denied rumors that it's about to go under. (Noel Celis/AFP via Getty Images)
A woman cries as she and other people gather at the Evergrande headquarters in Shenzhen, southeastern China, on Sept. 16, 2021, as the Chinese property giant said it's facing "unprecedented difficulties" but denied rumors that it's about to go under. Noel Celis/AFP via Getty Images

The company had about 2.39 trillion yuan ($328 billion) in liabilities in the January-to-June period, lower than the 2.44 trillion yuan ($334 billion) recorded last year. Its total assets also decreased from 1.8 trillion yuan ($247 billion) last year to 1.74 trillion yuan ($239 billion) this year.

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Evergrande said that its board has reviewed its cash flow projections and believes that the company “will be able to adequately fund its operations and meet its financial obligations as and when they fall due within the next 12 months from 30 June 2023.”

“In the first half of 2023, China’s property market has cooled down significantly, with sales area of national commodity house falling by 5.3 percent year-on-year. A number of real estate companies defaulted on their debts, further exacerbating the volatility in the market,” it stated.

The company said it had “actively planned for the resumption of sales and successfully seized the short boom of the property market that emerged at the beginning of the year, achieving a comparatively substantial increase in sales performance.”

Bankruptcy Filing in New York

This came just a week after Evergrande filed for bankruptcy in New York on Aug. 17.

The filing under Chapter 15 of the U.S. Bankruptcy Code shields non-U.S. companies under restructuring from creditors coming after their U.S.-based assets.

People walk through the Evergrande Changqing community in Wuhan, Hubei Province, China, on Sept. 24, 2021. (Getty Images)
People walk through the Evergrande Changqing community in Wuhan, Hubei Province, China, on Sept. 24, 2021. Getty Images

The bankruptcy filing from Evergrande is feeding into growing fears in a country now struggling with a deteriorating real estate market and broader economic turmoil.

Once China’s second-largest homebuilder by sales, Evergrande defaulted in late 2021 with some $300 billion of debt on its back. Companies accounting for 40 percent of Chinese home sales have since defaulted, and Country Garden, another leading Chinese developer, on Aug. 6 missed two dollar-denominated bonds totaling $22.5 million, leaving it with a 30-day grace period before it gets labeled a defaulter.

Evergrande said in a filing that its bankruptcy protection application to the U.S. court is a normal procedure for offshore debt restructuring and doesn’t involve a bankruptcy petition. It clarified that its U.S. dollar-denominated notes are governed by New York law.

Eva Fu and Reuters contributed to this report.
Aldgra Fredly
Aldgra Fredly
Author
Aldgra Fredly is a freelance writer covering U.S. and Asia Pacific news for The Epoch Times.
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