3rd October 2023 – (Hong Kong) China Evergrande, the troubled Chinese property firm, experienced a surge of over 28 per cent in its shares on Tuesday on the Hong Kong stock exchange. This comes just days after the company disclosed that its billionaire founder, Hui Ka Yan, is under investigation for unspecified crimes.
The stock initially soared by more than 60 per cent but then fluctuated throughout the day, eventually settling at a 28 per cent increase. The resumption of trading in Evergrande’s stock following a suspension last Thursday may have fueled speculation of progress in the company’s restructuring efforts, according to Linus Yip, Chief Strategist at First Shanghai Securities.
However, some analysts view the gains as being driven by speculative activity, with concerns over the company’s future prospects. Willer Chen, a senior research analyst at Forsyth Barr Asia, expressed uncertainty about the potential for proper investors to profit amidst the volatility surrounding Evergrande.
China Evergrande has been grappling with a severe debt crisis, which escalated when it defaulted on its offshore debt obligations in late 2021, leading to global market jitters and fears of contagion. The crisis deepened last week when the company’s main unit in China was unable to issue new debt due to an ongoing investigation, further complicating its restructuring plans.
The clock is ticking for Evergrande to secure creditors’ approval for the restructuring of its offshore debt. If the company fails to submit a new debt revamp plan by the end of October, a major Evergrande offshore creditor group is reportedly planning to join a liquidation court petition against the developer, as reported by Reuters last Tuesday.
With the recent setbacks, analysts suggest that the debt restructuring plan may falter, increasing the risk of the company being liquidated. Evergrande is scheduled to have a hearing on a winding-up petition on 30th October. As of the end of June, the company estimated its debts to be around US$328 billion.