HONG KONG (REUTERS) - China Evergrande Group shares jumped as much as 10 per cent in resumed trade on Tuesday (Jan 4) after the developer said a government order to demolish 39 buildings on the resort island of Hainan would not affect the rest of its project there.
The firm, struggling to repay more than US$300 billion (S$407 billion) in liabilities, also said its contracted sales for 2021 had plunged 39 per cent from the previous year to 443 billion yuan (S$95 billion). Its shares were up 4.4 per cent early on Tuesday, in line with the broader Chinese property sector.
Evergrande’s shares were suspended from trading on Monday and Tuesday morning, pending the release of inside information.
JPMorgan said in a report early this week that most developers had missed their 2021 sales targets, although sales still managed average growth of 3 per cent year on year. The investment bank expected yearly sales growth to continue to shrink in the first quarter due to a very high base and weak market sentiment.
Evergrande confirmed late on Monday that on Dec 30, the authorities in Danzhou city, Hainan province, had ordered it to demolish 39 buildings at Ocean Flower Island, a massive integrated resort development where Evergrande has spent 81 billion yuan to build over 60,000 homes. It has not disclosed the reason for the demolition order and Reuters could not reach the Hainan provincial authorities for comment.
The order did not involve other plots of land in the project, Evergrande said on Tuesday. “The company will actively communicate with the authority in accordance with the guidance of the decision letter and resolve the issue properly,” it added in the filing.
On its liquidity status in general, the firm said it would continue to actively maintain communication with creditors.
Investors in financial products issued by the company protested outside the cash-strapped company’s offices in Guangzhou on Tuesday, with many worried that their returns would be sacrificed to keep real estate projects afloat.
Members of the crowd of roughly 100 people shouted “Evergrande, return our money!”, reprising a chant used by disgruntled investors and suppliers last autumn as the deterioration in the developer's financial position became apparent.
Last Friday, Evergrande announced a dial-back of plans to repay investors in its wealth management products, announcing that each could expect 8,000 yuan per month in principal payment for three months starting in January, irrespective of when their investment matures.
Lured by the promise of yields approaching 12 per cent, gifts such as Dyson air purifiers and Gucci bags, and the guarantee of China’s top-selling developer, tens of thousands of investors bought wealth management products through Evergrande.
More than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties - bought products that raised more than 100 billion yuan in the past five years, said a sales manager of Evergrande Wealth, launched in 2016 as a peer-to-peer online lending platform that originally was used to fund its property projects.
