Pit stop and then (perhaps) start again. Evergrande was suspended from trading on the Hong Kong Stock Exchange. A stop that would have been requested by Evergrande itself pending announcements on a “transaction importance”. 51% of the property management unit of the Chinese real estate giant, according to reports from the state tabloid Global Times, would be about to switch to competitor Hopson Development in a deal worth about five billion dollars. A breath of fresh air for Evergrande, submerged by about $ 305 billion in debt accumulated over more than two decades of applying a reckless operating model, albeit widespread throughout the Chinese real estate sector. The stop to trading on the company’s shares (which in 2021 have already lost 80% of their value) had reinforced concerns about its fate, given the failure to meet two payment deadlines for offshore bond coupons in the last days of September. . Waiting for official news, the Hong Kong stock exchange closed today’s session with a tone of -2.19%.
Shares of Hopson also suspended, which did not comment on Evergrande but also spoke of an upcoming announcement of a transaction to acquire shares in a Hong Kong-listed company. Those little more than five billion are not enough for Evergrande to relaunch, but in the meantime they can represent a lifeline to try to meet the bond maturities, which provide for the payment of bond coupons of 7.2 billion by 2022. In the meantime , a new immediate test is looming, with a $ 260 million note issued by Jumbo Fortune Enterprises due to expire in the next few hours. Non-payment could lead to default and new pressures on the Chinese currency.
Hopson has a market value of $ 7.8 billion, up 40% over the course of 2021. Founded in 1992 in Guangzhou, the same city where Evergrande was born in the southern province of Guangdong. It has around seven thousand employees and manages residential, commercial and hotel properties in major Chinese cities. Launched on the stock exchange in 1998, it has around seven thousand employees. Its head office has long since been moved to Beijing, a sign of a close relationship with the world of Chinese politics.
The Beijing government has so far remained rather silent about Evergrande’s fate, but has allegedly invited state and private companies to acquire some of its assets to avoid uncontrolled bankruptcy. Just a few days ago, Xu Jiayin’s company announced the sale of its stake in Shengjing Bank to a state-owned wealth management company for approximately $ 1.5 billion. The proceeds from the sale will be used to pay the debt that the company owes to the same bank, one of its main creditors.
Evergrande is looking to sell other assets as well in an attempt to salvage its core business. For example, wait for offers on the electric vehicle development unit, with the possible interest of Xiaomi, one of the leading Chinese and global smartphone manufacturers. The unpacking of the giant in order to avoid its ruinous fall to the ground would seem the preferred option of the Chinese government, interested in three fundamental aspects. First: to protect the interests of local investors, who in fact received the payment of some interest due on Thursday 23 September. All this also to the detriment of foreign creditors, who seem to be at the end of the line. Second: avoiding a potential systemic contagion of the Evergrande crisis. Third: respect the new “red lines” of Xi on the real estate sector and on the debt risk of Chinese private companies, called to adapt to the era of “common prosperity”.