China’s Evergrande shares rise 17 percent after losses

Shares of embattled Chinese property developer Evergrande Group soared more than 17 percent on Thursday after the company said it struck an agreement with Chinese bondholders to meet some of its debt obligations.

The stock, which is still down more than 80 percent since Jan. 1, popped as much as 32 percent at one point Thursday in Hong Kong trading before paring some of those gains to settle at HK$ 2.67.

Cash issues at Evergrande — which has amassed over $300 billion in debt, more than any other real estate developer in the world — spooked markets globally earlier this week as investors wondered how the effects of the company’s potential collapse might ripple around the world.

The company faced deadlines Thursday to make interest payments on some of its bonds, and it said Wednesday that it had struck a deal with domestic bondholders.

But Evergrande didn’t provide details on whether it met its obligation in cash or other assets. It also did not comment the status of payments due Thursday to offshore investors, including major international asset managers.

Evergrande stock took a plunge on September 20, 2021 sending waves of panic that the Chinese property developer would default due to debt.
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Despite the stock’s slight rebound, Evergrande’s second-largest shareholder, Chinese Estates, said Thursday that it has sold about $32 million worth of shares in the company and said it might sell its remaining stake. The company added that it expects to see a huge loss from the position.

Investors nonetheless cheered the move, sending shares of Chinese Estates almost 6 percent higher in Hong Kong trading.

Also Thursday, financial regulators in Beijing met with representatives of Evergrande and instructed the company to focus on finishing construction and avoid defaulting on near-term debt, Bloomberg reported, citing a person familiar.

The company said on September 23, 2021 that it had struck a deal with Chinese bondholders and would start paying some of its debt.
The company said on September 23, 2021 that it had struck a deal with Chinese bondholders and would start paying some of its debt.
EPA/ALEX PLAVEVSKI

There’s no indication that the government is looking to bail the company out, the news site added, but the meeting suggests Beijing is looking to keep any fallout from spreading throughout the country’s real estate and financial sectors.

At the same time, though, Chinese authorities have directed local governments to prepare for the potential downfall of the company, according to the Wall Street Journal, suggesting Beijing does not plan to prop the company up with a bailout.

Governments have been ordered to prepare to prevent unrest and mitigate any ripple effect, such as by limiting job losses, the outlet added, citing officials familiar with the discussions.

Investors in Hong Kong nonetheless appeared to grow optimistic Thursday that the Chinese government will contain any fallout from a potential Evergrande default.

Shares of Chinese residential real estate developer China Vanke jumped 4.5 percent, while Sun Hung Kai was up almost 3 percent. Country Garden soared over 7 percent.