Evergrande shares plunge on market return as deal falls through

Evergrande shares plunge on market return as deal falls through

There are concerns that the crisis at embattled China Evergrande could spill over into the wider economy.
There are concerns that the crisis at embattled China Evergrande could spill over into the wider economy.

BEIJING: Chinese property giant Evergrande's shares plunged on Thursday after resuming trading in Hong Kong, with the failure of a unit sale deal deepening fears the indebted firm will collapse and send shockwaves through the world's second-largest economy.

Evergrande had suspended trading on Oct 4 pending an announcement on a "major transaction" as it struggled with some $300 billion of debt -- with investors worried about the potential fallout from its predicament.

On Thursday, its shares dropped 10.5% at the open, and were later trading about seven percent down.

A deal worth HK$20.04 billion (US$2.58 billion) to sell a 50.1% stake in its property services arm had fallen through, it a statement Wednesday, when it announced it would resume trading.

The buyer in talks with Evergrande was reportedly a unit under Hong Kong real estate firm Hopson Development Holdings.

Hopson shares rose 5% on Thursday morning, as Evergrande Property Services tumbled 4.5%.

Evergrande said it would continue to implement measures to ease its liquidity issues, cautioning that "there is no guarantee that the group will be able to meet its financial obligations".

The Shenzhen-based company has missed several payments on dollar-denominated bonds.

A 30-day grace period on an offshore note is up on Saturday.

Fears that Evergrande could collapse and send shockwaves through the Chinese economy has rattled buyers and markets -- though Beijing has insisted any fallout would be containable.

Data this week showed China's economic growth slowed more than expected in the third quarter as the crackdown on the property sector and an energy crisis began to bite.

In a sign of the ongoing weakness, home sales by value slumped 16.9 percent on-year in September, following a 19.7% fall in August, AFP calculations based on official data showed.

China's new-home prices also fell for the first time in six years last month.

Several domestic property rivals have in recent weeks already defaulted on debts and have seen their ratings downgraded.

Hong Kong-listed Sinic Holdings became the latest to miss a payment, while mid-sized competitor Fantasia also failed to meet obligations in recent weeks.

Evergrande first listed in Hong Kong in 2009, raising HK$70.5 billion (US$9 billion) in its initial public offering -- making it China's largest private real estate company and founder Xu Jiayin the mainland's richest man at the time.

In an expansion spree, Xu -- also known as Hui Ka Yan in Cantonese -- bought the then-embattled Guangzhou football team in 2010, renaming it Guangzhou Evergrande and pouring money into world-class players and coaches.

The group diversified into various sectors, including bottled water and electric vehicles.

But Evergrande started to falter under the new "three red lines" imposed on developers in a state crackdown in August 2020 -- forcing the group to offload properties at increasingly steep discounts.

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