Just when it appeared like the crippled Chinese property sector was getting its act together, along comes the perennial danger stock China Evergrande Group to once again ruin things.
After the shares had edged up nearly 4% to the close last Friday from the start of the year – easily outperforming the sliding Hong Kong markets which is down 8.5% year to date, Monday saw Evergrande, out of the blue, ask for trading in its shares and those of other group companies, to be suspended.
No reason was given in the brief statement that baldly announced: “Accordingly, all structured products relating to the company will also be halted from trading at the same time.”
That saw shares of associates, Evergrande Property Services Group and China Evergrande New Energy Vehicle Group were also suspended.
Hong Kong-based analysts were quick to point out that this suspension — the second this year — came ahead of an expected $US2 billion repayment obligation on Wednesday, and another next month of $US1.4 billion.
That makes last week’s $US117 million coupon payments from Russia look like small beer.
The two payments are massive and could force the Chinese government to show its hand on how it intends to handle the slow implosion of the property sector.
The troubled developer was labelled as being in default by international ratings firms in December after it failed to repay liabilities on time.
Shenzhen-based Evergrande said in January that it aimed to present a preliminary restructuring proposal in the next six months.
On Sunday, an onshore subsidiary company said it received bondholders’ approval to delay coupon payments on its four billion yuan note, meaning the delay won’t trigger a default on the bond.
As well, Chinese media also reported that Evergrande’s onshore unit will sell its 30% stake in a Nanjing property company to Avic Trust Co. for an undisclosed sum.
Shenzhen itself is one of the centres of the latest upsurge in Covid infections, having been shut down for a week up to Sunday.
The official Xinhua newsagency reported on Monday that Government offices, enterprises, and businesses in Shenzhen were set to resume normal work and production from yesterday.
While that helps Chinese confidence, the looming multi-billion-dollar payments from Evergrande are the real confidence tester.
