Business

Evergrande: Shares in troubled Chinese developer plunge 80%

  • By Annabelle Liang
  • business reporter

Aug 28, 2023 at 2:15 am BST

Updated 4 minutes ago

Image source: Getty Images

Shares in embattled Chinese developer Evergrande are down around 80% as the company resumes trading in Hong Kong for the first time in a year and a half.

Shares have lost more than 99% of their value over the past three years as Beijing cracked down on real estate firms.

Evergrande is at the center of a real estate market crisis that is threatening the world’s second largest economy.

On Sunday, the company reported a loss of 33 billion yuan ($4.5 billion; 3.6 billion pounds) for the first six months of the year.

However, that was an improvement from the 66.4 billion yuan loss the company reported in the same period last year.

The company added that its revenue for the first six months of this year rose 44% year on year to 128.2 billion yuan. However, cash holdings fell by 6.3% over the same period.

Evergrande shares have been suspended from trading since March last year.

“The key for policymakers right now is to prevent financial contagion and limit spillover throughout the financial system,” Qian Wang, chief economist for Asia-Pacific at investment firm Vanguard, told the BBC.

“Policymakers need to provide further liquidity and credit support to the economy and the real estate sector,” she added.

Troubles in China’s housing market have heightened concerns about the world’s second-largest economy’s post-pandemic recovery.

Also on Monday, China halved a 0.1% tax on stock trading to “stimulate capital markets and boost investor confidence.”

The move came days after the country’s central bank cut one of its key interest rates for the second time in three months amid slowing exports and weak consumer spending.

Major stock indices in Hong Kong and Mainland China rose following the news.

Earlier this month Country Garden, one of China’s biggest real estate developers, warned it could post a loss of up to $7.6 billion (£6 billion) in the first six months of the year.

The rating agency Moody’s downgraded the company’s rating on the grounds of “increased liquidity and refinancing risks”.

China’s real estate industry was rocked when new rules controlling the amount of money big real estate firms could borrow were introduced in 2020.

Evergrande, once China’s top developer by revenue, had racked up more than $300 billion in debt as it expanded aggressively, becoming one of the country’s largest companies.

Evergrande has been working to renegotiate its arrangements with creditors after the company defaulted on repaying its debt.

Chapter 15 protects a foreign company’s US assets while it works to restructure its debt.

Evergrande’s financial woes have impacted the country’s real estate industry, as a number of other developers have defaulted on debt, leaving construction projects unfinished across the country.

Source: www.bbc.com

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