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As Evergrande scrambled to raise funds to repay debt, regulators warned that China’s financial system faces broader risks.
Evergrande’s stock price plummeted by 19% on Monday to its lowest point in more than 11 years.
As of noon, the stock has touched 2.06 Hong Kong dollars (0.26 US dollars), the lowest level since May 2010.
The company’s property management division fell more than 12%, while its electric vehicle division fell 8%. The share price of Hengteng Networks, a movie streaming media company controlled by Evergrande, plunged 14%.
Evergrande has been scrambling to raise funds to pay for its many lenders, suppliers and investors. Regulators warned that if instability, its US$305 billion in liabilities could bring broader coverage to the country’s financial system. risks of.
Four bank executives told Reuters that one of Evergrande’s major banks had provided part of its loan loss provisions to troubled developers, and some creditors were planning to give it more time to repay it.
The developer said on Sunday that it has begun using real estate to return investors’ wealth management products.
Policymakers require Evergrande’s major banks to extend interest payments or extend loans, and market observers mainly believe that the government is unlikely to provide direct assistance.
Evergrande will pay $83.5 million in interest on its March 2022 bond on September 23. It also has $47.5 million in interest due on September 29 for the March 2024 notes. If Evergrande fails to settle the interest within 30 days of the scheduled payment date, both types of bonds will default.
In any case of default, Evergrande will need to restructure bonds, but analysts expect investors to have a lower recovery rate. The company’s bond trading highlights the extent to which investors’ expectations for its prospects have deteriorated this year.
The trading price of 8.25% of USD bonds in March 2022 was 29.156 on Monday afternoon, with a yield of over 500%, compared to approximately 13.7% at the beginning of the year. The 9.5% bond in March 2024 is 26.4, and the yield exceeds 80%, compared with 14.6% in early 2021.
Goldman Sachs said last week that since Evergrande owns US dollar bonds jointly issued by the parent company and the special purpose company, the recovery rates of the two groups of bonds in potential restructuring may be different, and any potential restructuring process may be prolonged.
‘Mode shift’
The company’s plight also put pressure on the broader real estate industry and the yuan, which fell to a three-week low of 6.4831 per dollar in offshore transactions.
Faced with the uncertainty of how much economic impact President Xi Jinping is willing to accept when he promotes turbulent market movements to achieve “common prosperity” and control overly indebted companies, many investors choose to sell first and then ask questions.
The Hang Seng Property Index fell 6.6%, the biggest drop since May 2020. Henderson Land fell 12%. Sun Hung Kai Properties fell 9.1%, the biggest drop since 2016. Cheung Kong Holdings fell 7.9%.
According to a Reuters report on Friday, Chinese officials told Hong Kong developers that Beijing was no longer willing to tolerate so-called monopolies. The report quoted unidentified developers as saying that officials did not set a road map or deadline.
“This is a paradigm shift,” said Hao Hong, chief strategist at Bank of Communications International, referring to the Reuters report. “People need to pay close attention.”
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