Evergrande shares fall 14% in Hong Kong as trading resumes after 17-day halt

The Chinese real-estate giant, Evergrande shares on Thursday, 21 October, fell as much as 14% in Hong Kong as they resumed trading after a 17-day halt. According to BBC, the hugely indebted Chinese real estate developer had stopped its shares from trading ahead of an announcement. Reports suggested that real estate firm Hopson Development was set to buy a 51% stake in its property services unit. 

Evergrande’s shares fell after the struggling Chinese company said on Wednesday that the $2.6 billion deal had fallen through as they were unable to agree on the deal terms. The Chinese firm said that the deal was cancelled because the “buyer had not met the prerequisite to make a general offer for shares”. Evergrande made the statement through the Hong Kong stock exchanges and it gave no other details. 

The crisis at Evergrande has now triggered fears that its potential collapse could send shockwaves through global markets. The Chinese firm is struggling to reduce its $310 billion of debt to comply with curbs on borrowing by China’s real estate industry. The Chinese central bank, on the other hand, has tried to allay those fears and stated that the risk of spillover to the financial industry is controllable. 

Evergrande crisis 

Meanwhile, it is worth mentioning that China's second-largest property developer has been reeling under debt since the Communist government tightened limits on corporate debt levels. The crisis over Evergrande began in 2020 when Beijing, worried by sprawling debt in the real estate industry, brought in new rules to control the amount owed by giant developers. The company hit an initial stumbling block last year to meet the interest payments on its debts. However, now, things have gone from bad to worse as its share price has tumbled and its bonds have been downgraded by global credit rating agencies. 

Evergrande’s chairman and founder Hui Ka Yan has said that now its plan is to try to secure extensions for its debts and “other alternative arrangements” with its creditors. However, Hui also added that there is “no guarantee” that the group will be able to meet its financial obligations. As per reports, last week, Evergrande had been granted a three-month extension on another of its debts after agreeing to provide extra collateral. 

(With inputs from AP)