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Aug. 28 (UPI) — Evergrande, troubled Chinese property giant, resumed trading on the Hong Kong stock exchange after a 17-month suspension. Unfortunately, its shares plummeted by 79%, reflecting a $4.5 billion loss and a total debt of $327.7 billion. These financial struggles have forced the company to file for bankruptcy in the United States.
On March 18, 2022, Evergrande’s shares closed at 21 cents, but when trading resumed, they crashed by as much as 87% to just 3 cents. Although they made a slight recovery, ending the session at 4.4 cents, the company’s future remains uncertain.
Evergrande’s financial woes are indicative of a broader real estate crisis that threatens China’s economy. The country has been struggling to recover from the COVID-19 pandemic, and Evergrande’s situation only adds to the challenges.
In a recent filing to the Hong Kong Stock Exchange, Evergrande reported a $4.5 billion loss for the first half of the year, an improvement from the $9 billion loss in the same period last year. The company’s directors have implemented measures to improve liquidity and financial stability, but cash holdings have still declined by 6.3%.
Evergrande’s troubles have had a ripple effect on the real estate sector, which accounts for a significant portion of China’s economy. Other developers have also defaulted on their debts, leading to the abandonment of numerous construction projects across the country.
“The key for policymakers at this moment is to prevent financial contagion and limit spillover into the overall financial system,” said Vanguard’s Asia Pacific chief economist Qian Wang in an interview with the BBC.
To alleviate its financial burden, Evergrande filed for Chapter 15 bankruptcy protection in New York on August 17. This legal action provides the company with time to restructure its debts accumulated over the past 15 years as it aimed to become one of China’s leading corporations. Evergrande is seeking recognition of its restructuring efforts in Hong Kong, the Cayman Islands, and the British Virgin Islands.
As disclosed in July, Evergrande reported losses of $81.1 billion in the past two years. These losses were primarily attributed to a downturn in the real estate market, resulting in devalued property developments and financial assets, as well as higher borrowing costs.
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