The Chinese developer with astronomical debt Evergrande confirmed on Tuesday October 3 the resumption of its listing on the Hong Kong Stock Exchange, where trading in the stock had been suspended since Thursday. The group took this decision the day after press reports that the company’s director, Xu Jiayin, was under house arrest. Evergrande shares then lost 19%.
The stock gained nearly 10% on Tuesday in the first minutes of its return to the Hong Kong Stock Exchange, before jumping nearly 35% around 10 a.m. (02:00 GMT). However, trade was very volatile. This resumption of quotation comes in the middle of a public holiday in China for the National Day (October 1), a period generally conducive to real estate purchases.
The alleged placement under house arrest of the boss of Evergrande further obscures the group’s horizon, after several disappointments in recent days. A subsidiary of Evergrande announced last Monday that it was unable to repay interest on a loan, increasing pressure on the group before a meeting with its creditors scheduled for the end of October in Hong Kong. The same day, Evergrande canceled a meeting on the restructuring of its debt without notice, to the great dismay of its lessors and accentuating the vagueness around its future. If this restructuring fails, the collapse of Evergrande could have serious consequences, as the group has tens of thousands of employees and hundreds of unfinished real estate projects.
The real estate sector in China has experienced tremendous growth in recent decades, in a country where the purchase of a property even before its construction made it possible to finance other projects. But the groups’ debt has reached such levels that the authorities have decided to put an end to it from 2020. Since then, access to credit has been considerably reduced for these groups, some of which are now struggling to complete construction sites, fueling a crisis of confidence with potential buyers which is dragging down prices.
Evergrande, whose descent into hell regularly makes the headlines, had a colossal balance at the end of June estimated at 328 billion dollars (307 billion euros). The setbacks of the group, former number one in real estate in China, have fueled distrust for two years in a sector that has long been very lucrative but is now shunned, against a backdrop of economic slowdown and unfinished housing. In recent months, this crisis of confidence has overtaken groups previously considered financially solid, such as Country Garden, one of Evergrande’s competitors.