Hong Kong has temporarily suspended trading in all shares and derivative instruments of Evergrande Group, the troubled property giant from mainland China. The suspension comes as the company faces increasing financial and legal challenges. (File photo by Stephen Shaver/UPI)
Sept. 28 (UPI) — Trading of shares in the Chinese property company Evergrande has been halted by market regulators in Hong Kong following reports that the company’s founder and chairman, Hui Ka Yan, is under house arrest.
The suspension includes trading of Evergrande derivatives and comes just one month after trading resumed following a 17-month suspension by the Stock Exchange of Hong Kong, as stated in a trading notice.
“Due to the suspension of trading in the underlying shares, trading in futures and options for China Evergrande Group have been suspended until further notice,” the notice stated without providing further details for the decision.
This decision comes three days after Evergrande’s mainland division, Hengda Real Estate, defaulted on a $547 million bond payment. The company cited an inability to roll over the debt due to an ongoing investigation by the China Securities Regulatory Commission.
Earlier this month, Hui Ka Yan was reportedly put under residential surveillance by Chinese authorities. Other current and former executives have also been rounded up in recent days. Hui is not under formal arrest and has not been accused of any crime, according to reports.
Meanwhile, several employees of Evergrande’s wealth management unit have been detained since September 18 in Shenzhen, located near Hong Kong. It is unclear whether these individuals have been charged with any criminal offenses.
The suspension of Evergrande’s shares is the latest setback for the struggling company, which is scheduled to appear in court in Hong Kong on October 30 to defend against a winding-up petition filed by its creditors.
With approximately $328 billion in liabilities, Evergrande’s financial troubles have significant repercussions. Many of the liabilities are owed to ordinary Chinese individuals who have made down payments on apartments and houses that have yet to be built or remain unfinished. Additionally, the company’s cash flow issues have left its suppliers highly vulnerable.
Between 2021 and 2022, Evergrande reported combined losses of $81.1 billion, primarily due to payments to suppliers and lenders as it struggled to complete over 1,000 projects in 280 cities.
On August 17, Evergrande filed for Chapter 15 bankruptcy protection in New York, aiming to restructure its debt accumulated over a 15-year period. The company sought recognition of ongoing restructuring discussions in Hong Kong, the Cayman Islands, and the British Virgin Islands.
Evergrande’s troubles reflect a broader real estate crisis that poses a significant threat to China’s economy. As the country grapples with the aftermath of three years of COVID-19 lockdowns and restrictions, several other major Chinese developers have also defaulted on their debts or face challenges related to cash flow and access to credit to complete projects.
In a filing to the Hong Kong Stock Exchange on August 28, the company reported a loss of $4.5 billion in the first half of 2023, down from $9 billion in the same period the previous year. Evergrande’s directors have implemented various measures to improve the group’s liquidity and financial position.
While revenue increased by 44% to $17.5 billion compared to the January-to-June period in 2022, cash holdings declined by 6.3%.
Evergrande’s troubles have had a ripple effect on the entire real estate sector, which accounts for approximately one-third of China’s economy. Other developers have defaulted on their debts, leaving numerous unfinished projects across the country.
