Shares of debt-laden property developer China Evergrande Group made a remarkable comeback on Tuesday as they resumed trading in Hong Kong after being suspended last week. By midday, Evergrande’s shares were up 23%, experiencing a substantial jump of over 60% earlier in the session.
Investor Confidence Boost
Evergrande, the world’s most heavily indebted real estate developer, is currently at the center of a property market crisis that is negatively impacting China’s economic growth. The company’s shares were suspended from trading as it confirmed that Chinese police were investigating its chairman, Hui Ka Yan, for “suspicion of illegal crimes.”
However, there is some relief as Evergrande Property Services, an affiliate of the company, also resumed trading on Tuesday, as announced by the Hong Kong Stock Exchange. On the other hand, shares in China Evergrande New Energy Vehicle Group remain suspended pending an announcement regarding inside information about the company, according to a notice released by the Hong Kong exchange. Both units had halted trading last week.
Challenges Persist
Evergrande has been dealing with financial difficulties due to its immense debt burden. The company recently disclosed that it had to postpone a proposed debt restructuring meeting with creditors due to underperforming sales. Furthermore, Evergrande is unable to issue new debt as its subsidiary, Hengda Real Estate, currently faces an investigation.
China’s property sector plays a crucial role in the country’s economy. However, the industry has been on a decline since regulators implemented stricter borrowing rules in 2020. This decline led to Evergrande defaulting on its debt obligations. Even a former Chinese official estimated that the country’s 1.4 billion population would not be able to fill all the vacant homes across China.
The future of China Evergrande Group remains uncertain as it grapples with immense debt, investigations, and a struggling property market. Investors will closely monitor the company’s progress as it seeks a path towards stability and financial recovery.