Evergrande Falls Further as S&P Warns Chinese Bail Out Unlikely

By Fran Wang
Fran Wang
Fran Wang
September 21, 2021 Updated: September 21, 2021

China Evergrande Group’s stock and bond values fell further on Tuesday, fueling concerns about broader influence after S&P Global Ratings warned that Beijing is unlikely to bail out the developer.

Evergrande’s shares in Hong Kong fell as much as 7 percent on Tuesday before closing 0.4 percent down, following a 10 percent drop the previous day.

One S&P report released on Monday forecasts that the Chinese regime will not directly support Evergrande, which puts the property developing giant on the brink of default.

“We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” the report states.

“Evergrande failing alone would unlikely result in such a scenario.”

As Bloomberg-compiled data show, a nearly $120 million interest payment on two Evergrande bonds matures on Sept. 23.

The Thursday deadline is a crucial test of whether the developer will continue to meet its obligations to bondholders. At the same time, it has fallen behind on payments to banks, suppliers, and holders of domestic investment products.

Investors bargain prices based on a strong probability of default, with one of the bonds trading at less than 30 percent of face value.

Concern over Evergrande’s ability to cope with $305 billion in liabilities spreads to Chinese capital markets. Shares of other local real estate companies have gone down as well.

China’s central bank injected $14 billion of short-term cash into its financial system on Sept. 17, signaling the authorities’ intent to ease market nerves.

Fran Wang