Evergrande shares in China tumble after Hopson asset deal collapses – .

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Evergrande shares in China tumble after Hopson asset deal collapses – .


China Evergrande Group has started repaying a small portion of the money owed to buyers of its investment products, weeks after people protested the missed payments at its Shenzhen headquarters, pictured here on September 30, 2021.
Gilles Sabrie | Bloomberg | Getty Images
BEIJING – Shares of China Evergrande briefly fell more than 10% when trading opened on Thursday, after a failed deal to sell some of its assets to Hopson Development Holdings.
Hopson shares traded more than 5% higher, while Evergrande Property Services briefly fell 9% in morning trading.

Heavily in debt, Evergrande was in talks earlier this month to sell part of its service unit to Hopson, its smaller rival. However, Hopson announced on Wednesday evening that talks had failed to buy a 50.1% stake in Evergrande Property Services. Evergrande confirmed the termination of the agreement in a separate file.

The deal is reportedly worth HK $ 20.04 billion ($ 2.58 billion), according to the documents.

Evergrande is China’s second-largest developer by sales and the industry’s largest offshore bond issuer, with a total of around $ 300 billion in liabilities. Concerns over the company’s ability to repay debt have raised fears of a spillover into the Chinese real estate market, which, along with related industries, accounts for around a quarter of national GDP.
Trading in all three stocks resumed Thursday, more than two weeks after the companies halted trading ahead of a “major trade.”

No progress on asset sales

The collapse of the Hopson deal comes as Evergrande nears the end of a 30-day grace period for a closely watched $ 83 million interest payment to investors in an offshore U.S. dollar-denominated bond. If the developer does not pay by Saturday, he will be technically in default.

Evergrande said Wednesday evening that since the sale of its $ 1.5 billion stake in Shengjing Bank in late September, “there has been no significant progress on the sale of the group’s assets.”

Last week, Reuters reported, citing sources, that Chinese state-owned Yuexiu Property has dropped a $ 1.7 billion deal to buy Evergrande’s head office in Hong Kong.

The two companies did not immediately respond to a request for comment from CNBC.

Evergrande’s heavy reliance on debt to grow rapidly was the subject of further government scrutiny last year, with the rollout of the ‘three red lines’ policy for corporations. real estate in order to reduce the ratio of their debt to their assets.

China Evergrande had violated all three red lines in the first half of this year, while Hopson and Yuexiu had not crossed any of those lines, according to Natixis.

Evergrande said that as of October 20, sales of the company’s contracted properties since early September stood at 3.65 billion yuan ($ 571.1 million).

This is 90% less than in August, when contract real estate sales amounted to 38.08 billion yuan.

Since the start of the year, sales of properties under contract through Oct. 20 amounted to 442.3 billion yuan, Evergrande said.

The authorities seek to ensure

China has sought to allay fears of contagion, which spooked world markets earlier.

Since Friday, the People’s Bank of China has declared Evergrande more than once an individual and controllable case.

More recently, central bank governor Yi Gang said on Wednesday that the first response measure was to prevent Evergrande’s risks from spreading to other real estate companies.

Vice Premier Liu He said at a financial forum Wednesday that individual problems have arisen in the real estate market and reasonable financing needs have been met. Liu did not mention Evergrande by name.

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