Shares of China Evergrande Group and its property management unit were suspended from trading in Hong Kong as the company struggles to manage its escalating financial crisis. The trading halt, which also affected all structured products related to the company, was announced on Monday morning without a specified reason, according to a stock exchange filing.
This suspension comes as Evergrande’s stock has fallen 80% this year, reflecting deep concerns over its ability to meet its obligations. With more than $300 billion in liabilities, the property giant has been scrambling to sell assets and raise capital, while market observers worry the crisis could have far-reaching effects on China’s economy and financial system.
The reason for the trading suspension is believed to be linked to Evergrande’s ongoing asset disposal or potential capital restructuring efforts. Bloomberg Intelligence analyst Patrick Wong suggested that weaker property sales might accelerate the company’s asset sales.
In the wake of the suspension, Hopson Development Holdings Ltd., a Chinese property developer, revealed plans to acquire a 51% stake in Evergrande’s property services unit for more than HK$40 billion ($5.1 billion). However, Hopson declined to comment on the deal.
Evergrande Property Services, the most valuable of Evergrande’s businesses, is worth around HK$55 billion, surpassing the parent company’s market value of HK$39 billion. The company has previously indicated that it is exploring selling parts of this unit, along with its electric vehicle division, although no significant progress has been made.
Despite Evergrande’s onshore bonds facing multiple trading halts in recent weeks, trading in the company’s Hong Kong-listed shares had continued until now, which led many to speculate that the suspension might be related to a significant event such as an asset sale or a restructuring move.
The trading halt is a rare event for the company, which last requested a suspension in 2016. Evergrande Property Services went public in December 2020, raising $1.84 billion, and was valued at approximately HK$95.1 billion at the time. However, its stock has since tumbled by 43% in 2021, largely due to the parent company’s debt crisis.
In the meantime, Chinese authorities have been taking steps to mitigate the fallout from Evergrande’s troubles. Last week, officials met with banks to discuss measures to ease credit for homebuyers and stabilize the real estate sector. The government also intervened by purchasing Evergrande’s stake in a struggling lender.
The company’s difficulties have led to a sharp decline in consumer confidence. In September, Evergrande’s contracted sales reportedly plummeted 86% from the previous month. Meanwhile, the company faces a looming debt deadline with a bond maturing this week, further raising concerns about its financial stability.
With no clear resolution in sight, the future of Evergrande remains uncertain, and its struggles continue to send ripples through the property and financial sectors.
