Indebted Chinese developer Evergrande calls for trading halt amid rumours of sale to rival

Evergrande has sparked concerns its debt woes could spread through China's financial system and reverberate around the world.
Evergrande has sparked concerns its debt woes could spread through China's financial system and reverberate around the world.PHOTO: AFP

BEIJING - Embattled Chinese developer Evergrande Group called for a trading halt on its shares on Monday (Oct 4) as speculations mount over a possible sale of its real estate unit to another Chinese developer.

China’s second-largest developer has been trying to stay afloat amid liabilities of over 1.97 trillion yuan (S$415 billion) since last year, after regulators in Beijing imposed lending restrictions to curb property firms’ ballooning debt.

But two missed bond payments late last month worth US$129 million combined have triggered worries that the world’s most indebted developer’s liquidity challenges might have become insurmountable.

Evergrande called for the trading halt, pending the release of “an announcement containing inside information about a major transaction”, according to a filing with the Hong Kong Stock Exchange.

Speculations have been rife that rival Hopson Development is set to buy a 51 per cent stake in Evergrande Real Estate for HK$40 billion (S$7 billion), according to Chinese news outlet Cailian.

The Guangzhou-based developer has not confirmed the purchase but has also called for a trading halt on its shares.

Hopson said in a filing with the Hong Kong Stock Exchange that it has agreed to acquire the shares of a listed company, without further specifications. 

Hopson was founded in 1992 and is headed by Ms Zhu Jurong. Her father, Zhu Mengyi, was the company’s founder and chairman.

Ms Zhu made headlines when she became the company chairman last year aged 31.

Mr Bo Zhuang, a senior sovereign analyst at investment management firm Loomis Sayles, told The Straits Times that the sale of Evergrande’s real estate unit is “part of the bigger effort to raise money to repay their debt and continue its existing operations”.

“Evergrande’s trading halt is due to the major transaction of asset disposal,” added Mr Zhuang, whose work focuses on China.

The possible collapse of Evergrande, once considered among China’s “too-big-to-fail” firms, sparked concerns of the contagion spreading in the world’s second-largest economy’s financial and property markets when it missed a key payment deadline on its bonds on Sept 24. 

To address the possible contagion, the central bank pumped 460 billion yuan into the banking system over a five-day stretch last week to ease liquidity.

The additional liquidity is meant to boost banks’ confidence to lend to developers and other companies in the property industry, including construction.