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Evergrande falls almost 12% in the stock market due to the uncertainty about the payment of its bonds

2021-09-25T11:01:38.189Z

The possibility that the Chinese giant suspends payments puts investors on alert. European banks try to convince markets that their exposure to the world's most indebted real estate is limited



The real estate developer China Evergrande Group registered a drop of 11.6% this Friday in the Hong Kong Stock Exchange after there was no news on Thursday about the payment of its dollar-denominated bonds, although it was the deadline for that will pay the holders the coupon thereof.

Specifically, the price of the firm in the Asian country has fallen to 2.36 Hong Kong dollars, from the 2.67 that it had reached on Thursday.

The intraday maximum has been at 2.64 dollars, while the minimum has reached 2.30 dollars.

This Thursday was the deadline for Evergrande to pay the coupon for one of its dollar-denominated bonds.

The payment due was approximately US $ 83.5 million (€ 71.16 million).

Evergrande reported this week that it had reached an agreement with the bondholders of its bonds denominated in yuan for the payment of the coupon of that instrument, but the same has not happened with this bond.

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The bondholders did not receive the payment of the amount due, whose deadline was midnight in the United States, according to

Reuters

, citing knowledgeable sources.

Evergrande has not made any communication in this regard, but has a grace period of 30 days before the bond is considered as unpaid (

default

).

China's financial regulators have issued precise instructions to the company to focus on completing the construction of its properties and repaying the debt of individual investors with the aim of avoiding short-term suspension of payments, according to Bloomberg. citing an unidentified source.

For days, European banks have been trying to convince investors that the exposure of the world's most indebted real estate company is limited in the euro zone. The president of the European Central Bank, Christine Lagarde, assured in an interview with CNBC that the impact that is being seen at the moment is focusing on China. His comments coincide with those of Federal Reserve Chairman Jerome Powell, who said Wednesday that although the situation could affect global financial conditions, the company's debt has little direct exposure to the United States.

The Swiss National Bank is closely monitoring the situation at China's Evergrande Group, the financial institution's chairman Thomas Jordan said on Thursday amid concerns that its debt problems could pose risks to China's financial system.

"It's wrong to be an alarmist, but it's also wrong to dismiss it as a small local problem," Jordan said.

China's central bank has intervened to try to mitigate the impact of this uncertainty on the rest of the market through liquidity injections (35,000 million euros this week).

However, Beijing is silent on its plans regarding Evergrande.

According to the US newspaper Wall Street Jornal on Thursday, the Chinese government has urged local authorities to prepare for a "storm."

The consequences of the possible bankruptcy of Evergrande do not include only finances: 200,000 employees work for the company, which has several deliveries of properties pending to thousands of clients who have already advanced the payment.

Therefore, the protests have spread to more cities in the country this week.

The real estate sector accounts for about 29% of China's GDP, so investors fear that the fall of the "Great White Rhino" could shake the country's economy.

Source: elparis

All business articles on 2021-09-25

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