Evergrande’s stock price rose sharply, developers claim that the dispute with the bank has been resolved
After the debt-laden real estate group announced that it had settled a legal dispute with a Chinese bank, China Evergrande’s stock price jumped from a four-year low.
Developers led by billionaire Xu Jiayan are being closely watched by regulators, investors, and rating agencies, who are concerned about the potential spread of China’s financial system and systemic risks that will result. Evergrande is in debt.
Since traders circulated an order issued by the Jiangsu Provincial Court earlier this month, the company’s stocks and bonds have been selling off. Frozen Bank deposits of RMB 132 million (US$20.4 million) from Evergrande’s mainland China branch.
mood Worsen On Tuesday, the authorities in Shaoyang City, Hubei Province, China said that due to the shortage of funds in the pre-sale account, sales of the company’s two projects have been temporarily suspended.
But Evergrande’s Hong Kong-listed shares rose 9% on Thursday after the company said it had settled its legal dispute with China Guangfa Bank over loans.
Bloomberg data shows that Evergrande’s offshore US dollar bonds due in 2025 fell to a record low of 47 cents against the US dollar on Thursday, and then fell back to about 51 cents.
Evergrande’s stock price is still down 46% this year.
Last Friday, the stock rose nearly 10% in a year following the vacillating prospects of the company with a shortage of funds. Surprise bonus Payment this month.
There has been uncertainty about how the former China’s richest Hui people will refinance the group’s huge debts.
“This is a dead cat rebound, but it won’t last long because there are many problems [at Evergrande] Not yet resolved,” said Louis Tse, managing director of Hong Kong-based brokerage Wealthy Securities, referring to Thursday’s share price rise.
Fitch Ratings Agency Downgrade Last month, the Chinese developer’s long-term foreign currency rating was downgraded from B+ to B, a move that reflects Evergrande’s pressure to scale down and reduce debt.
The Chinese government’s efforts have exacerbated Evergrande’s problems Reduce risks in the real estate industryBeijing is seeking to reduce the leverage of real estate developers through the “three red lines” policy, and control rapidly rising housing prices, which restricts debt-to-cash, net debt to equity, and debt-to-asset borrowing.
Goldman Sachs analysts pointed out that China’s real estate stocks have generally been sold off in recent weeks. Since June, the industry’s stock prices have fallen by an average of 15%, pushing the company’s price-to-book ratio to its lowest valuation in a decade.
The sell-off stems from policy and Credit crunch This includes raising mortgage interest rates and stricter scrutiny of unsecured short-term debt.
The bank’s analysts said that the bad news about Evergrande also “intensified market concerns about the overall industry’s liquidity situation”.