Hong Kong CNN –
Evergrande Group, the world’s most indebted real estate developer, has reported a sharp decline in its net loss for the first half, on the back of a rise in sales on the back of the “brief housing market boom” earlier this year.
Still, shares fell more than 70% on Monday after trading resumed after a 17-month suspension, although shares in most Chinese real estate firms traded higher after Beijing further eased housing measures.
The Shenzhen-based company was one of the top-selling real estate developers in China for many years. But the company had borrowed heavily to fund its expansion and defaulted in 2021, sparking a crisis in China’s real estate sector, which accounts for up to 30% of the country’s economy. Earlier this month, the company filed for bankruptcy in the United States.
Investors are keeping a close eye on its development due to the key role it has played in China’s current economic woes.
Evergrande’s loss attributable to shareholders was 33 billion yuan (US$4.5 billion) in the January-June period, down 50% from the loss of 66.4 billion yuan (US$9.1 billion). dollars) in the same period last year, according to a filing with the Hong Kong Stock Exchange on Sunday. Revenue rose 44% year-on-year to reach 128.2 billion yuan (US$17.6 billion).
The company said it had “actively planned to resume sales and successfully capitalized on the brief boom in the real estate market that emerged earlier in the year.”
The Chinese economy got off to a strong start to the year, thanks to a post-opening rebound after the country lifted its tough Covid-19 restrictions. But that rebound has slowed since April.
Evergrande suffered a combined loss of $81 billion in 2021 and 2022, according to a long-overdue financial report released last month.
The challenges are not over yet. Evergrande is still encumbered with 2.39 trillion yuan ($328 billion) in debt as of the end of June. That’s only slightly less than the total liabilities of 2.44 trillion yuan ($334 billion) reported late last year.
Total assets also fell to 1.74 trillion yuan ($239 billion) from 1.84 trillion yuan ($253 billion).
Evergrande is currently undergoing a state-managed debt restructuring that began in late 2021, shortly after the company defaulted on its debt.
In March this year, the country unveiled a multi-billion dollar plan to make peace with its international creditors but said it needed $36 billion to $44 billion in additional financing to complete unfinished real estate projects.
In Sunday’s filing, Evergrande said it has already received new funding for certain projects and will continue to seek additional capital.
However, the company’s ability to continue as a going concern still depends on whether it can successfully complete the offshore debt restructuring plan proposed in March, it said.
It also has to negotiate with other onshore lenders to extend the company’s borrowings, the company added.
Since Friday, Beijing has once again increased political support for strengthening the real estate sector, which is a major brake on growth for the country’s economy.
Five Chinese regulators — including the Ministry of Housing and Urban-Rural Development, the People’s Bank of China and the State Tax Administration — independently announced a series of measures to boost home buying and revitalize the troubled industry.
The measures include allowing local governments to scrap a rule that barred people who have already held mortgage loans from being considered first-time homebuyers in major cities. Such homebuyers generally enjoy preferential treatment when it comes to bank loans.
“This mortgage easing move is likely to trigger rising modernization demand in major cities,” Nomura analysts said Monday.
“We believe many cities … will lift the rule given the current threat of a statewide housing meltdown.”
The housing and tax authorities also jointly announced on Friday that they would extend income tax refunds for people who buy new homes within a year of selling previous properties.
Most Chinese real estate developers listed on the Hong Kong Stock Exchange appear to have been boosted by the move.
On Monday, Hong Kong’s Country Garden rose 8.6%. Guangzhou R&F Properties rose nearly 7%. Sunac China rose 3.4% and China Overseas Land rose 2.7%.
However, Nomura analysts said the measures announced in recent days were not enough to stem “the downward spiral” in China’s real estate sector.
Beijing may be forced to take more measures, including further cutting deposit and mortgage rates and providing funds to help urban villages renovate, they added.