China’s Evergrande shares fall after Hopson’s asset transaction fails

China Evergrande Group began returning a small portion of the amount payable to purchasers of investment products weeks after people protested the omission of payment at the Shenzhen headquarters depicted here on September 30, 2021. I did.

Gilles Sabrie | Bloomberg | Getty Images

Beijing- Evergrande of China Some of the assets Hopson Development Holdings fell.

Hopson shares traded more than 5% higher, Evergrande Property Service A temporary drop of 9% in the morning trading.

Earlier this month, heavy-duty Evergrande was in talks to sell part of its service division to a small rival, Hopson.But Hopson announced late Wednesday: Negotiations failed Buy a 50.1% stake in Evergrande Property Services. Evergrande confirmed the closing of the transaction in a separate filing.

According to Filing, the deal would have been worth HK $ 20.04 billion ($ 2.58 billion).

Evergrande is China’s second-largest developer in terms of sales and the industry’s largest issuer of offshore bonds. Total debt of about $ 300 billion. Concerns about the company’s debt repayment capacity have raised concerns about its ripple effect on the Chinese real estate market, which, along with related industries, accounts for about a quarter of GDP.

Trading of three shares resumed on Thursday. Transactions were suspended prior to “large-scale transactions”.

No progress in asset sales

The collapse of the Hopson contract occurs as Evergrande approaches the end of the 30-day grace period, which is being watched carefully. $ 83 million interest payments For investors in offshore US dollar-denominated bonds. If the developer fails to pay by Saturday, it will be technically the default.

Evergrande sold $ 1.5 billion late Wednesday Shengjing Bank shares In late September, “no significant progress was made regarding the sale of our assets.”

Reuters quoted a source last week as a Chinese state-owned enterprise Yuexiu Property Have Dropped $ 1.7 billion in transactions Purchase Evergrande’s Hong Kong headquarters building.

Both companies didn’t immediately respond to CNBC’s request for comment.

Evergrande’s reliance on debt for its rapid expansion was strengthened by government scrutiny last year with the deployment of a “three redline” policy by real estate companies to reduce the ratio of debt to assets.

According to Natixis, China Ever Grande violated all three red lines as of the first half of this year, but Hopson and Koshihide did not cross any of these lines.

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According to Evergrande, as of October 20, the company’s contract real estate sales since early September were 3.65 billion yuan ($ 571.1 million).

This is 90% less than in August, when sales of contracted properties were 38.08 billion yuan.

According to Evergrande, the annual contract sales of real estate by October 20 was 442.3 billion yuan.

Authorities are seeking a guarantee

China has sought to mitigate the fear of transmission that previously surprised the global market.

Since Friday People’s Bank of China said Evergrande is often an individual controllable case.

Recently, the governor of the central bank Yi Gang said on Wednesday The first step in responding is to prevent Evergrande’s risk from spreading to other real estate companies.

Deputy Prime Minister Liu He said at a financial forum Wednesday that individual problems were occurring in the real estate market. Reasonable funding needs are met. Liu did not mention Evergrande by name.

China’s Evergrande shares fall after Hopson’s asset transaction fails

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