In an effort to settle nervy investors, and no doubt its thousands of customers, the chairman of stricken Chinese property giant Evergrande told staff on Tuesday said the company is confident it will “walk out of its darkest moment” and deliver property projects as pledged.
Chinese media reported that Chairman Hui Ka Yuan’s letter was timed to coincide with the country’s Mid-Autumn festival (when moon cakes are handed out) and act as a sign of his sincerity.
The chairman of the debt-laden property developer said Evergrande will fulfil responsibilities to property buyers, investors, partners and financial institutions.
Investors in Evergrande, however, ignored the faux reassurances and pushed the shares down in Hong Kong by another 7% at one stage before having the loss to around 3.5%.
Tuesday’s close was well above the $UK2.06 hit on Monday. The shares fell 10% on Monday.
Hong Kong’s market was lower but nowhere near the panic-like 3.8% slide of Monday.
Other property stocks such as Sunac, China’s No.4 property developer, and state-backed Greentown China recouped some of their Monday losses on Tuesday as investors held their nerve and contained the concerns to Evergrande.
Mainland China markets were again closed for a public holiday and the Chinese government was again quiet on the crisis at Evergrande, and there was no mention of the firm’s troubles in major state media during on the holiday Tuesday.
A major test for Evergrande comes tomorrow, with the firm due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on September 29 for March 2024 notes.
It also has more than $US20 million in interest payments on a domestic debt tomorrow, All repayments have grace periods, so the problem could be pushed into October.
Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates (the grace period).
Reuters reported that Citi analysts in a research note dated Tuesday said that China’s regulators may “buy time to digest” Evergrande’s non-performing loan problem by guiding banks not to withdraw credit and extend the interest payment deadline.
Those analysts said there was “mounting investor concern about potential risk spillover” from Evergrande’s debt crunch, considering the potential liquidity drain for private developers due to increased difficulty in obtaining bank credit, and the contagion effect in the banking sector as they expect around 40.7% of China banks’ assets are related to the property sector.
Still, Citi said that while Evergrande’s default crunch was a potential systemic risk to China’s financial system, it was not shaping up as “China’s Lehman moment”.
S&P Global Ratings said in a report on Monday it does not expect Beijing to provide any direct support to Evergrande.
“We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” the rating agency said.
“Evergrande failing alone would unlikely result in such a scenario,” S&P said.
Wall Street futures trading were showing gains after Monday’s fall late in Tuesday’s session Asia.
