09/20/2021 9:34 AM
Clarín.com
Economy
Updated 09/20/2021 9:42 AM
The crisis of the second largest Chinese real estate company Evergrande worsens,
which this Monday
fell by 19% in the Hong Kong stock market
, its loss in more than 11 years.
This collapse leaves two great fears latent:
first, that the firm will go bankrupt,
as it cannot meet its financial obligations, and second that the result will impact and drag down the rest of the world's markets.
The resounding fall of this Monday amplifies the losses of its business prospects due to the proximity of a payment of its debt and the doubts that it has resources to meet its financial obligations.
The
stock touched US $ 2.06 in Hong Kong, the lowest level since May 2010
, although it ended down 10.24%.
From its all-time highs in October 2017,
the company's stock valuation plummeted 92.77%
.
In the last 12 months alone,
the collapse was more than 88%.
Investors fear that a possible bankruptcy of the
"Great White Rhino" will affect all of China,
as
the company's liabilities represent about 2% of the Asian country's GDP
. Evergrande has been struggling to find funds to pay its many lenders, suppliers and investors, and regulators warn that its $ 305 billion of liabilities could
pose greater risks to the country's financial system if it does not stabilize.
One of Evergrande's top creditors made loan loss provisions to the embattled developer,
while some creditors are planning to give it more time to pay
, four bank executives told Reuters.
The developer explained Sunday that it began paying investors in its wealth management products with real estate.
Policy makers are telling Evergrande's top lenders to
extend interest payments or renew loans,
and market watchers say a direct government bailout is unlikely.
Investors fear that this week it will no longer be able to face the payment due, as its debt accumulates more than US $ 300,000 million.
The real estate sector accounts for more than a quarter of Chinese GDP
Evergrande must pay US $ 83.5 million in interest on September 23 for a March 2022 bond. On September 29 it must pay another US $ 47.5 million from September 29 for the March 2024
bonds. Both bonds would default if Evergrande does not pay interest within 30 days of the expected payment dates.
In any default scenario,
Evergrande will have to restructure the bonds,
but analysts expect a low rate of recovery for investors.
The trading of the company's bonds revealed the drastic deterioration in expectations of those of its prospects have deteriorated this year.
The 8.25% dollar bond in March 2022 was trading on Monday at 29% of the nominal in the afternoon,
which represents a return of more than 500%
, compared to 13.7% at the beginning of the year.
The 9.5% bond as of March 2024 stood at 26% of the nominal
with a yield of more than 80%,
compared to 14.6% at the beginning of 2021.
Goldman Sachs said last week that since Evergrande has dollar bonds issued by both the parent company and a special purpose vehicle, a possible restructuring could differ between the two sets of bonds, and any possible restructuring process could be prolonged.
The company's woes also put pressure on the
broader
real estate sector, as well as the yuan
, which fell to a three-week low of 6.4831 to the dollar.
Shares of Sunac, China's fourth largest real estate developer, fell more than 10%,
while state-owned Greco 10%, while state-owned Greentown China plunged more than 9%.
Analysts expect the Chinese government to intervene to limit the consequences if Evergrande defaults
.
And the authorities are clearly watching closely, as they try to project calm.
On Wednesday, Fu Linghui, a spokesman for China's National Bureau of Statistics, acknowledged the difficulties of "some large real estate companies," according to state media.
Without naming Evergrande directly,
Fu said that China's real estate market was stable this year,
but it is necessary to look at the impact of recent events "on the development of the entire industry."
Possible Chinese "Lehman Brothers"?
Photo: Noel Celis / AFP
What is Evergrande
Evergrande is one of the largest real estate developers in China.
The company is part of the Global 500, which means it is also one of the largest companies in the world by revenue.
It is listed in Hong Kong and is based in the city of Shenzhen, in southern China, and employs about 200,000 people.
The group was founded by Chinese billionaire Xu Jiayin
, who was once the richest man in the country.
Outside of the real estate market,
the group invested in electric vehicles, sports and theme parks.
He even
owns a food and beverage business, selling bottled water, groceries, dairy products,
and other goods throughout China.
In 2010, the company bought a soccer team, which is now known as Guangzhou Evergrande.
And that team built what is believed to be the largest soccer school in the world.
Evergrande also caters to tourists through its theme park division, Evergrande Fairyland.
The project includes an artificial island with shopping centers, museums and amusement parks.
YN
Look also
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Fear in China over a possible bankruptcy of real estate giant Evergrande
