Shares in troubled actual property developer China Evergrande Group and its property administration unit Evergrande Property Services had been suspended from buying and selling in Hong Kong on Monday as buyers awaited the subsequent steps within the saga of its debt disaster.
Cailian, a Chinese on-line information service affiliated with the state-run newspaper Securities Times, mentioned one other developer, Hopson Development Holdings, was planning to accumulate a majority share in Evergrande Property Services Group.
Hopson suspended buying and selling of its shares in Hong Kong on Monday. The suspension was “pending the release of announcement(s) in relation to a major transaction of the company under which the company agreed to acquire the shares of a company . . . listed on the stock exchange,” it mentioned in a submitting.
Hopson’s public relations division mentioned the corporate wouldn’t touch upon “market rumors.”
Evergrande Property Services mentioned in its announcement to the Hong Kong alternate that its shares had been suspended from buying and selling pending an announcement associated to a merger or takeover.
Phone calls to Evergrande’s PR workplace in Hong Kong rang unanswered and the corporate’s places of work elsewhere in China had been closed for a vacation.
Evergrande has been struggling to keep away from defaulting on billions of {dollars} of debt. The firm owes billions to banks, prospects and contractors and has been promoting off property to resolve its money crunch.
Analysts say the Chinese authorities was reluctant to be seen as bailing Evergrande out at a time when authorities are pushing firms to scale back debt ranges. A takeover of the corporate’s property administration arm can be one step in restructuring it by splitting it into smaller entities, mentioned Francis Lun, CEO of Geo Securities in Hong Kong.
The central authorities may ask native governments in flip to supply funding for Evergrande to complete its many incompleted tasks in order that they are often delivered or bought to patrons, enabling the developer to pay its contractors, he mentioned.
“As far as the Chinese government’s concerned, this is the best way forward. And of course, in doing so, I think some creditors will be hurt, mostly overseas creditors,” Lum mentioned.
Evergrande is one in every of China’s greatest personal sector conglomerates, with greater than 200,000 workers, 1,300 tasks in 280 cities and property of two.3 trillion yuan ($350 billion). It owes collectors some 2 trillion yuan ($310 billion).
The firm ran up billions of {dollars} in debt constructing condo complexes, malls and workplace towers over time. Its scenario worsened after August 2020, when Beijing tightened controls on financing for China’s 12 greatest builders, forcing them to scale back company debt hundreds which might be seen as a menace to the financial system.
Evergrande has been promoting off varied property to attempt to alleviate the issue. Last week, it bought its $1.5 billion stake in Shengjing Bank to cowl its debt to the state-owned lender primarily based in northeastern China.
China Evergrande Group’s shares have misplaced greater than 80% of their worth this 12 months and rankings companies say it’s vulnerable to defaulting on its money owed.
Like Evergrande, Hopson, primarily based in Guangdong adjoining to Hong Kong, is one in every of China’s greatest property firms. Reports present it has a a lot decrease debt to fairness ratio than its bigger rivals.
Jitters over a slowdown in China’s financial system and potential turmoil in its very important property business have rattled world markets previously few weeks.
The concern is {that a} default by Evergrande may cascade all through the Chinese financial system and even world monetary markets.
“I think the government is really close to a resolution over the Evergrande problem because it cannot drag on forever, it will hurt everybody involved,” Lum mentioned.
Hong Kong’s benchmark Hang Seng index dropped 2.2% Monday on heavy promoting of actual property firms and banks.
