Shares of Chinese developer Evergrande have plummeted by approximately 80% as they resumed trading in Hong Kong for the first time in 18 months.
The once-prominent company has experienced a drastic decline, shedding more than 99% of its stock value over the past three years due to intensified regulatory actions by Beijing targeting the property sector.
Evergrande’s struggles have ignited concerns about the stability of China’s real estate market and its potential impact on the global economy.
On Sunday, Evergrande reported a loss of 33 billion yuan ($4.5 billion) for the first half of the year, an improvement from the 66.4 billion yuan loss recorded during the same period in the previous year.
Also Read: China Property Giant Evergrande Files For US Bankruptcy Protection
The firm’s directors have taken measures to enhance liquidity and financial stability, according to a filing with the Hong Kong Stock Exchange. Despite a 44% surge in revenue to 128.2 billion yuan for the first six months of 2023, the company’s cash reserves declined by 6.3% during the same timeframe.
China’s property market turmoil has amplified concerns about the country’s post-pandemic economic recovery.
In response to these challenges, China has cut its stock trading tax by 0.1% and reduced key interest rates to bolster the capital market and investor confidence.
Qian Wang, Chief Asia Pacific Economist at Vanguard investment firm, emphasized the need for policymakers to prevent financial contagion and spillover into the broader financial system. “Policymakers will need to provide further liquidity and credit support to the economy and the real estate sector,” she explained.
The property market crisis has reverberated across the industry, with Evergrande’s financial issues cascading to other developers and resulting in unfinished projects scattered throughout the nation.
China’s real estate industry faced significant upheaval when new regulations were introduced in 2020 to restrict borrowing by major real estate firms.
The once-thriving Evergrande, which previously held the title of China’s top-selling developer, found itself encumbered by over $300 billion in debt as it aggressively expanded its operations.
The company’s troubles culminated in a Chapter 15 bankruptcy protection filing in a New York court earlier this month. Chapter 15 safeguards the US assets of foreign entities undergoing debt restructuring.
Evergrande’s challenges underscore the broader uncertainties surrounding China’s economic landscape and the efforts of policymakers to navigate a precarious real estate market.