China’s second-largest property developer, Evergrande’s shares, are on their way to close Monday’s historic low, down 19 percent in Hong Kong.
Concerns about the health of China’s real estate sector also spread to the Hong Kong market on the first trading day of the week and brought the strongest sale of real estate companies’ stocks in more than a year.
The Hang Seng Real Estate Index fell 5.9 percent, its biggest drop since May 2020. China’s largest insurance company in terms of market value, Ping An Insurance lost 7.3 percent in the Hong Kong market. Hong Kong’s benchmark index Hang Seng experienced the biggest daily loss in the last two months with 3.3 percent. On the other hand, Chinese dollar bonds, which are rated below investment grade, fell by 2 cents.
Investor concerns centered on the China Evergrande Group have been spreading for weeks after Chinese officials remained silent about the government’s dealing with the world’s most heavily indebted real estate developer.
Philip Tse, Head of Real Estate Research in Hong Kong and China said that “Investors these days may be worried about companies with high debt and may not look too closely at valuations. The decline will continue further unless the government gives a clear signal on Evergrande or eases restrictions on the real estate sector.”
Evergrande Problem Continues to Make its Impact
An important corner will be taken this week in the debt crisis that threatens the financial system of Chinese real estate giant Evergrande. Evergrande, which has more than $300 billion in debt, has to pay interest on its two bonds on Thursday.
The value of the traded bonds and bills of the real estate giant, which has already fallen behind in bank loan repayments, is also decreasing.
A bond of Evergrande dropped as much as 30 percent of the issue price in transactions, indicating strong bankruptcy risk. Although China poured $14 billion in short-term cash into the financial system on Friday, concerns about the spread of Evergrande debt risk dominate the markets.