Debt-laden Evergrande shares fall 14% to four-year low

The Evergrande Group or Evergrande Real Estate Group logo of a Chinese real estate company is visible on a smartphone and a PC screen.

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BEIJING – Hong Kong-listed shares of China Evergrande Group fell to their lowest level in four years on Tuesday following news of an asset freeze that renewed attention to the conglomerate’s debt problems immovable.

Evergrande shares fell more than 14% on Tuesday at noon, after falling 16.2% a day earlier.

The decline has wiped around 37 billion Hong Kong dollars ($ 4 billion) from China Evergrande’s shares since Friday, leaving it with a market value of around 93 billion Hong Kong dollars (nearly $ 12 billion), according to Wind Information.

Evergrande shares in China have fallen more than 60% in the past 12 months as Chinese authorities tried to cool the country’s vibrant real estate market with further restrictions, especially lending to real estate companies.

The latest drop in shares follows news that in early July, a local court in Jiangsu Province ruled that a branch of China Guangfa Bank could freeze 132.01 million yuan (20, $ 6 million) deposits from Evergrande Real Estate and its subsidiary Yixing Hengyu Real Estate.

The decision was disclosed last Tuesday, but has not attract the attention of the market until Sunday evening, according to Reuters.

Evergrande said in a statement Monday that Hengyu had a 132 million yuan loan from the bank in question – due next year on March 27. The company said it would sue the bank, according to a CNBC translation of the Chinese text.

“I’m not that worried,” Henry Chin, global head of thought investor leadership and head of Asia-Pacific research at CBRE, told CNBC’s Martin Soong on “Squawk Box Asia.”

Chin pointed to news of the past few days telling him that the Chinese government could better monitor commercial real estate debt issues.

Citing sources, Reuters reported on Friday that Chinese regulators want monthly statements from real estate developers on a form of debt called commercial paper. The report says Evergrande is the largest issuer, with its main real estate group holding 205.7 billion yuan ($ 32 billion) of commercial paper last year, up 390% from 2015.

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Requiring regular disclosures on commercial paper debt will reduce the risk of unexpected shocks from real estate developers, Chin said. He expects Evergrande to follow other real estate developers in selling non-core assets to pay off their debt and improve their financial situation.

Evergrande was founded in the late 1990s as a real estate developer.

In recent years, the company has climbed the ranks of Fortune’s Global 500 list and has grown into industries such as film and entertainment, life insurance, and spring water. Evergrande supports the Guangzhou football team.

The conglomerate’s unit for new energy cars – which includes electric cars – has announced ambitious annual production targets of 1 million vehicles by 2025 and 5 million by 2035.


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