China’s Evergrande Shares Plummet Over 80 Percent in Hong Kong Trading

China’s Evergrande Shares Plummet Over 80 Percent in Hong Kong Trading - Shares of Chinese real estate developer Evergrande Group plummeted by 86.7 percent in Hong Kong trading on Aug. 28 as the company resumed trading for the first time since its suspension in March 2022.

China’s Evergrande Shares Plummet Over 80 Percent in Hong Kong Trading

China’s Evergrande Shares Plummet Over 80 Percent in Hong Kong Trading

Shares of Chinese real estate developer Evergrande Group plummeted by 86.7 percent in Hong Kong trading on Aug. 28 as the company resumed trading for the first time since its suspension in March 2022.

Shares listed in Hong Kong dropped to HK$0.22, with its market capitalization shrinking to HK$2.9 billion ($369.73 million) from the HK$21.8 billion ($2.78 billion) when it last traded.

This marked the first time the embattled company resumed trading after its unexplained suspension on March 21, 2022.

Its Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, have both resumed trading in the past month after a 16 month halt.

The trade resumption is crucial for the company because its offshore debt restructuring plan includes swapping part of the debt into equity-linked instruments backed by them. Evergrande would have been delisted if the suspension had gone beyond 18 months.

In its filing to the Hong Kong Stock Exchange (pdf), Evergrande posted a 33 billion yuan ($4.5 billion) loss attributable to shareholders for the first six-month period, lower than the 66 billion yuan ($9 billion) loss reported last year.

A woman cries as she and other people gather at the Evergrande headquarters in Shenzhen, southeastern China on Sept. 16, 2021, as the Chinese property giant said it is facing "unprecedented difficulties" but denied rumors that it is about to go under. (Noel Celis/AFP via Getty Images)
A woman cries as she and other people gather at the Evergrande headquarters in Shenzhen, southeastern China on Sept. 16, 2021, as the Chinese property giant said it is facing "unprecedented difficulties" but denied rumors that it is about to go under. (Noel Celis/AFP via Getty Images)

The company had about 2.39 trillion yuan ($328 billion) in liabilities in the January to June period, lower than the 2.44 trillion yuan ($334 billion) recorded last year. Its total assets also decreased from 1.8 trillion yuan ($247 billion) last year to 1.74 trillion yuan ($239 billion) this year.

Evergrande said that its board has reviewed its cash flow projections and believed the company "will be able to adequately fund its operations and meet its financial obligations as and when they fall due within the next 12 months from 30 June 2023."

"In the first half of 2023, China’s property market has cooled down significantly, with sales area of national commodity house falling by 5.3 percent year-on-year. A number of real estate companies defaulted on their debts, further exacerbating the volatility in the market," it stated.

The company said it had "actively planned for the resumption of sales and successfully seized the short boom of the property market that emerged at the beginning of the year, achieving a comparatively substantial increase in sales performance."

Bankruptcy Filing in New York

This came just a week after Evergrande filed for bankruptcy in New York on Aug. 17.

The filing under Chapter 15 of the U.S. bankruptcy code shields non-U.S. companies under restructuring from creditors coming after their U.S.-based assets.

People walk through the Evergrande changqing community in Wuhan, Hubei Province, China, on Sept. 24, 2021. (Getty Images)
People walk through the Evergrande changqing community in Wuhan, Hubei Province, China, on Sept. 24, 2021. (Getty Images)

The bankruptcy filing from Evergrande is feeding into growing fears in a country now struggling with a deteriorating real estate market and broader economic turmoil.

Once China’s second-largest homebuilder by sales, Evergrande defaulted in late 2021 with some $300 billion of debt on its back. Companies accounting for 40 percent of Chinese home sales have since defaulted, and Country Garden, another leading Chinese developer, on Aug. 6 missed two dollar-denominated bonds totaling $22.5 million, leaving it a 30-day grace period before it gets labeled a defaulter.

Evergrande said in a filing that its bankruptcy protection application to the U.S. court is a normal procedure for offshore debt restructuring and does not involve a bankruptcy petition. It clarified that its U.S. dollar-denominated notes are governed by New York law.

Eva Fu and Reuters contributed to this report.