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Evergrande threatens collapse: the possible collapse of China's real estate giant, according to Bafin, poses no threat to German banks


Evergrande boss Hui Ka Yan tries again to reassure investors and customers. But at the same time, according to a newspaper report, the Chinese authorities are approaching local governments to prepare them for a possible collapse of Evergrande. Meanwhile, the German financial regulator Bafin sees no danger for German banks.

A report by the "Wall Street Journal" on the situation at the Chinese crisis group Evergrande causes investors to be uneasy. Equity futures are turning into negative territory on the Hong Kong Stock Exchange. According to the newspaper, the Chinese authorities are approaching local governments to prepare for a possible collapse of the property developer. According to the newspaper, the talks are an indication that there is resistance in Beijing to save Evergrande with state aid. The talks with the local authorities had the character of a "warning of the storm," it said, citing unnamed members of the Chinese authorities.

The financial supervisory authority Bafin sees no reason for an in-depth examination of German banks because of the crisis of the Chinese real estate giant Evergrande. "In the present case, the Bafin currently estimates the exposure of the German financial sector on the basis of the information available to it from the supervisory reporting system to be so low that it has not yet requested a stress test in this regard from the institutions under its supervision," says an on Thursday published the response of the Federal Ministry of Finance to a request from FDP member of the Bundestag Reginald Hanke.

The essence of such a test would be to clarify how great the risk would be that banks would have to cope with loan defaults if the Evergrande crisis worsened. Evergrande is the second largest real estate developer in China. The group has accumulated debts of the equivalent of more than 300 billion dollars, investors fear a default. Evergrande needs to raise funds to pay banks, suppliers and bondholders on time. The company is so large that some experts fear a “risk of contagion” for the Chinese economy and beyond.

The Federal Financial Supervisory Authority (Bafin) is keeping "the situation due to the dynamic development around the Evergrande Group in view of possible effects on the German financial sector," said the ministry.

The badly ailing Chinese real estate company Evergrande has debts of the equivalent of more than 300 billion dollars.

Investors fear a default.

The corporation has to raise money to pay banks, suppliers and bondholders on time.

In addition, Evergrande owes retail investors, including many employees, billions of dollars.

Hui did not provide any further information on the interest payment of 83.5 million US dollars (around 71 million euros) due on Thursday for another offshore bond.

Another interest payment of $ 47.5 million is due on September 29th.

According to the financial news agency Bloomberg, there is a grace period of 30 days for both payments, which could give Evergrande more time.

Second largest shareholder wants to sell the entire stake

Meanwhile, other shareholders are leaving the supposedly sinking ship. Chinese Estates Holdings has announced that it will sell its entire stake in Evergrande. The second largest shareholder in the troubled group announced that it had already sold shares worth $ 32 million and was planning to completely part with the holding company. The sale mandate is valid for twelve months from the date of a shareholders' meeting on September 23 to approve the sale, the company announced on the Hong Kong Stock Exchange.

Chinese Estates also said they had sold 108.91 million shares, or 0.82 percent of the issued share capital of Evergrande, for Hong Kong dollars ($ 246.5 million) between August 30 and September 21.

The company estimates that on the sale of its entire stake it will suffer a loss of approximately $ 1.22 billion in 2021.

The boss of Evergrande had encouraged employees in a letter on Tuesday.

He is firmly convinced that one can overcome the "darkest moment", wrote CEO

Hui Ka Yan


You will show yourself responsible towards home buyers, investors, partners and financial institutions.

mg / dpa-afx, Reuters

Source: spiegel

All news articles on 2021-09-23

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