Monday, January 03, 2022
Shivering game for industry giants
Evergrande shares suspended from trading
Trading in the papers of the ailing Chinese real estate developer Evergrande was suspended once as early as October. After the company missed a new coupon payment, the paper is currently not tradable again.
Trading in shares of the heavily indebted housing company China Evergrande is suspended in Hong Kong. The ailing real estate developer announced this on Sunday without giving a reason. Evergrande missed out on new coupon payments worth $ 255 million due last Tuesday, but both payments have not passed their 30-day grace period.
As early as October, trading in the papers of the largest Chinese construction company was interrupted due to unpaid loan interest. On Friday, Evergrande rolled back investor repayments on its wealth management products, stating that anyone can expect a monthly principal payment of 8,000 yuan ($ 1,257) for three months, regardless of when they are due. The move illustrates the worsening liquidity bottleneck at the Chinese industry giant and increases the pressure on the government in Beijing to prevent a conflagration in the real estate sector.
Because China’s real estate market is coming under increasing pressure. In the middle of the shaky game around the industry giant Evergrande, the statistical authorities reported a far-reaching downward trend in the housing market in mid-December. The prices for new homes fell by 0.3 percent in November compared to October. This is the biggest drop since February 2015. Only in nine out of 70 cities did prices go up at all in a month-on-month comparison.
Real estate shock is far from over
Revenue from the sale of new homes even shrank by 16.3 percent compared to November 2020. During this period, new construction and investments also declined: the area of newly started projects decreased by 21 percent, and developer investments by 4.3 percent. The real estate shock is far from over, judged experts such as Zhang Yi, chief economist at asset manager Zhonghai Shengrong Capital Management.
The pressure on the market results mainly from the debt crisis affecting some developers and the recent measures taken by the Chinese government. Stricter regulation of other industries is part of the thrust of China’s powerful head of state Xi Jinping, who, according to observers, wants to curtail the excesses of capitalism and bring the People’s Republic back to its socialist roots.