China’s Evergrande Group shares plunge by over 80% in Hong Kong

Evergrande's stock plunges 87% as it resumes trading after a 17-month halt, while China eases mortgage policies to revive the property market.

Livemint
Published28 Aug 2023, 09:28 AM IST
Shares of Evergrande Group plunged 87% after trading resumes in Hong Kong
Shares of Evergrande Group plunged 87% after trading resumes in Hong Kong(REUTERS)

Shares of China's real estate developer, Evergrande Group are bleeding in red as the stock plunged 87% in Hong Kong trading as they started trading for the first time in a year and a half.

Over 99% of the share value of embattled Chinese developers has been lost in the past three years. On Monday, Evergrande's market value shrank to just HK$4.6 billion ($586 million) from a peak of more than $50 billion in 2017.

On Sunday, the realty firm posted a loss of 33 billion yuan ($4.5 billion) for the first six months of the year.

However, that was an improvement on the 77.4 billion yuan loss it posted for the same period last year.

EVERGRANDE RESUMES TRADING

On 28 August, China Evergrande Group, the defaulted developer at the heart of the country’s real estate crisis resumed trading after a 17-month halt. The trading of Evergrande Group was suspended on March 18, 2022, with the company has lost over 95% of its market capitalisation from its peak.

The property developer released long-delayed earnings last month for 2021 and 2022 to resume trading in the Hong Kong stock exchange.

The Chinese developed claimed that conducted an independent investigation into the enforcement by banks of pledge guarantees for its Evergrande Property Services unit and addressed auditor modifications.

CHINA's CRACKDOWN ON REAL ESTATE DEVELOPERS

Several real estate developers have been hit in China due to the recent crackdown by the Chinese government on the booming real estate industry to cut risk and make homes more affordable.

China’s real estate sector is unraveling and risks are spreading to the country’s $60 trillion financial system. China’s existing policies have failed to sustain a rebound in the property market as price declines extend across the nation, putting the government’s 5% economic growth target at risk.

However, this weekend, China unveiled a further easing of its mortgage policies to halt a slump in its residential property market and revive growth. Beijing has proposed that local governments can scrap a rule that disqualifies people who’ve ever had a mortgage - even if fully repaid - from being considered first-time homebuyers in major cities. The government also said it will extend the personal income tax rebates for people who buy new homes within one year after selling old homes till the end of 2025.

In at least ten of the biggest cities, homebuyers with a mortgage record who don’t own property have been subject to higher down payment requirements and more restrictive borrowing limits. That has suppressed demand as these people have been treated as second-time buyers.

The country’s top housing official last month urged financial regulators and lenders to strengthen efforts to revive the property sector, calling for homebuyers who had paid off previous mortgages to be considered as first-time purchasers.

Developers are facing a 62 trillion yuan ($8.5 trillion) gap to meet their financial obligations, Australia & New Zealand Banking Group estimated in a report.

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First Published:28 Aug 2023, 09:28 AM IST
HomeCompaniesNewsChina’s Evergrande Group shares plunge by over 80% in Hong Kong

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