The world’s most indebted real estate group suspends its operations on the Hong Kong stock market as an avalanche of bad news continues to increase uncertainty about the company. Evergrande concrete continues to show cracks. All the events of the last few months continue to point towards the irreversibility of the debacle that not so long ago championed its respect in China’s real estate sector. Evergrande does not find alternatives to shore up its empire and the most recent proof is that it has suspended its listing on the Hong Kong Stock Exchange on Monday, limiting itself to communicating that it is waiting to publish “an announcement with confidential information.”
It is the second time that the Chinese brick giant has interrupted its operations in the Hong Kong stock market, after it did so in October pending “an important transaction” that did not materialize. The most indebted real estate group in the world accumulates a liability of more than 300,000 million dollars (about 265,000 million euros) and in 2021 its shares lost 89% of their value. Industry experts have feared since August that the collapse of Evergrande will generate a major crisis in the national real estate market, which in turn will cause a domino effect in the global financial system.
The alarms sounded again last night, when the local media reported on a document from the local government of Danzhou (southern island of Hainan) dated December 30 that ordered Evergrande to demolish 39 buildings within ten days. covering an area of 435,000 square meters. According to the notice sent to the company’s Hainan branch, the project violates urban and rural planning laws and does not meet quality standards. The real estate has not yet commented on the matter.
But it is that the avalanche of bad news about the group has not stopped since the beginning of December, when the credit rating agency Fitch Ratings declared Evergrande in partial suspension of payments for the default with the repayment previously agreed with its lenders in dollars. Last Tuesday, the group again defaulted on other foreign coupon payments valued at 255 million dollars (almost 225 million euros), increasing uncertainty about the future of the conglomerate.
According to estimates from financial information provider Bloomberg, Evergrande owes up to $ 19.2 billion (almost € 17 billion) in foreign bonds. Analysts warn that the company could find itself in a situation of cross-insolvency, in which a single creditor default may be enough for others to claim their loans back.
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Evergrande took another step back last week in its plans to reimburse investors for its wealth management products – unsecured financial products sold in China that typically offer a very high interest rate and supposedly guaranteed returns. The company announced on Friday that each investor would receive 8,000 yuan a month (1,100 euros) as a principal payment for three months, regardless of when their investment matures. Previously, the company had not mentioned any amount, but it had promised to return 10% of the investment at the end of the month, when the product expires.
In a statement posted on the website of this financial products unit, Evergrande said that the situation was not “ideal”, that it would “actively raise funds” and update the payment plan by the end of March, although without providing more details.
Although the property developer’s growing liquidity problems are more than evident, in a congratulations for the end of the year for the group’s employees, Xu Jiayin, president and founder of Evergrande, tried to call for calm by announcing that they had been resumed work on 91.7% of its national projects (after a three-month hiatus due to the inability to pay many of its suppliers and contractors), and promising “a bright future” for the conglomerate. On the 26th, the real estate company also announced that up to 39,000 homes would be delivered to their buyers in December, a higher number than in the previous three months.
The real scale of this deep debt crisis of what had become China’s main construction company has kept emerging in patches for months, presumably due to the unsuccessful efforts of managers to get the ship afloat without leaking insights that they could hasten the sinking. In order to send a message of reassurance, a risk control group was created in early December with the presence of Xu, as well as members of state-owned companies from the province of Canton – where Evergrande is based. and financial institutions.
The storm over the Chinese housing market broke out in August 2020, when the Xi Jinping administration passed a series of restrictions to control the industry’s debt level and drive down skyrocketing house prices. Some observers are of the opinion that the government wanted to send a message that the reckless expansion of the sector could not continue, as it goes against the new mantra of the Communist Party, that of “common prosperity”, which seeks to distribute wealth more fairly. and eliminate monopolistic practices. In December, the People’s Bank of China (the central bank of the Asian giant) announced that it would inject more than 166,000 million euros into the economy, which was interpreted as an attempt to counter the recession in the real estate sector, despite the fact that Beijing did not has hinted at a rescue.