Hong Kong CNN –
Shares of Evergrande Group crashed again on Wednesday as fears grew of a possible liquidation of the company, a harbinger of China’s property crisis.
The embattled developer’s stock fell 19% to close at 32 Hong Kong cents (4 US cents), reducing its market capitalization to just 4.2 billion Hong Kong dollars ($539 million). The decline took this week’s losses to 42%. The company has lost 99.9% of its value since peaking in October 2017.
Evergrande’s troubles deepened this week when it warned that its offshore debt restructuring plan could be in trouble due to a regulatory investigation into its main subsidiary in mainland China. The warning comes just a week after it was reported that Chinese police had launched their first criminal investigation into Evergrande after it failed to pay its debts nearly two years ago.
investors There was a sigh of relief last month when Evergrande reported a significant reduction in its losses in the first half of the year. The company then said this was due to an increase in revenue due to a “mini-boom” in China’s property market earlier this year.
But the news since then has been consistently negative, and a growing number of investors are reportedly calling for the company to be shut down if it is unable to come up with a new survival plan soon.
Jun Rong Yep, market analyst at IG Group, said investors are bullish because of “the increasing risk of Evergrande’s possible liquidation.”
Earlier, the default in 2021 of China’s second-largest real estate company, Evergrande, had created a crisis in the property sector, which continues to impact the broader economy.
Evergrande is trying to implement a government-supervised restructuring of its debts, which stood at $328 billion at the end of June. It unveiled a multibillion-dollar plan to make peace with its international creditors and recently filed for bankruptcy protection in the United States as part of the process.
If the restructuring fails, and Evergrande is unable to reach a new deal with its creditors, it may face liquidation, where its assets are sold and it ceases all operations.
Evergrande was forced to cancel meetings with creditors scheduled for this week because recent sales have been weaker than it expected.
Frederick Neumann, HSBC’s chief Asia economist, told CNN there is a big concern for investors. Are recent steps taken by Beijing to stimulate housing demand gaining momentum and to what extent? Development will be affected.
“So far, results have been mixed and further changes to China’s housing market policies, including lower mortgage rates, may be needed to stabilize sales and the sector more broadly,” he said.
“The [property] “This sector is so large that without a strong rebound, which appears unlikely at the moment, overall economic growth is likely to be much lower than in recent decades.”
—Mark Stewart contributed reporting.