Shares of China Evergrande Group, one of the top ten property developers in China, plummeted by almost 80% on Monday as trading in the stock resumed in Hong Kong after a 17-month suspension. This steep decline follows the company’s filing for bankruptcy in the United States, facing debts of $412.7 billion. Photo by MNXANL/Wikimedia Commons.
Aug. 28 (UPI) — Troubled Chinese property giant Evergrande saw its shares drop by 79% as trading resumed after a 17-month suspension. The company reported a loss of $4.5 billion and a total debt of $412.7 billion, leading to its bankruptcy filing in the United States. The decline in shares on the Hong Kong stock exchange was drastic, falling from 21 cents to below 3 cents before slightly recovering to 4.4 cents by the end of the session.
Evergrande’s financial crisis has created concerns about the impact on China’s economy, which is still recovering from the effects of the COVID-19 pandemic. The company’s half-year report showed a loss of $4.5 billion, compared to $9 billion in the same period last year. Despite a 44% increase in revenue to $17.5 billion, Evergrande’s cash reserves decreased by 6.3%.
The ripple effect of Evergrande’s problems has been felt across China’s real estate sector, causing other developers to default on their debts and leaving numerous unfinished projects throughout the country.
Vanguard’s Asia Pacific chief economist Qian Wang emphasized the need for policymakers to prevent financial contagion and limit the spillover into the overall financial system to mitigate the crisis.
To address its financial challenges, Evergrande filed for Chapter 15 bankruptcy protection in the United States and is currently engaged in restructuring talks in Hong Kong, the Cayman Islands, and the British Virgin Islands.
The company’s losses of $81.1 billion over the past two years can be attributed to a market slump, resulting in lower property valuations and increased borrowing costs.
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