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Business Standard
6 days ago
- Business
- Business Standard
Evergrande delisting over $45 billion debt deepens China property crisis
China Evergrande Group's delisting marks a bleak milestone for the nation's property sector, now in a fourth year of paralysis that continues to weigh down the world's second-largest economy. The company, once China's biggest developer by sales, will be removed from the Hong Kong stock exchange on Aug. 25, a year and a half after the shares were suspended and almost 16 years after the Guangzhou-based firm was listed. The delisting comes as liquidators sifting through the books revealed that the developer's debt load now stands at about HK$350 billion ($45 billion), much bigger than previously disclosed. 'It's a symbolic moment for the mainland property sector,' said Kenny Ng, a strategist at China Everbright Securities International. The drastic collapse 'will definitely leave a deep memory in all investors in the market.' Evergrande's downfall is by far the biggest in a crisis that dragged down China's economic growth and spurred a record of distressed builders. The company, which first defaulted on a dollar bond in December 2021, was once the country's largest developer by sales, and was worth more than $50 billion in 2017 at its peak. Despite government stimulus, property sales remain sluggish this year, prompting analysts including UBS Group AG's to delay expectations of a recovery to mid-to-late 2026. New-home sales by the 100 largest developers have fallen more than 20% for two consecutive months, China Real Estate Information Corp. data showed. Calls for further policy support for the residential market have grown louder as the slump drags on. Still, the Communist Party's decision-making Politburo refrained from adding property stimulus measures at a meeting last month after the Chinese economy held up surprisingly well in the face of US tariffs. Evergrande has been joined by a raft of firms in unraveling. On Monday, China South City Holdings Ltd. was ordered to liquidate by Hong Kong's High Court after failing to win enough support from creditors for its restructuring proposal. Hong Kong's courts have issued at least six wind-up orders for Chinese developers since the crisis began in 2021. Evergrande's liquidation continues to remain the most complex and serves as a road map for other developers going through the same process. About $150 billion of debt from the country's developers have fallen in distress. Even worse is that a growing number of builders that passed key milestones for restructuring proposals are now heading back to square one. Sunac China Holdings Ltd. became the first major Chinese builder to pursue a second debt overhaul plan. Liquidators' Chase Evergrande's liquidation has been a monumental task as the firm comprises 3,000 legal entities in multiple jurisdictions, as well as about 1,300 projects under development in more than 280 cities, according to the liquidators. They have assumed control of more than 100 companies related to the firm that collectively hold a value of HK$27 billion. There were also 3,000 projects under the Hong Kong-listed property management operation Evergrande Property Services Group Ltd. Creditors are especially paying close attention to the handling of this arm, since it 'represents a very substantial potential source of value' and are being given 'the highest priority' in terms of attention, the liquidators said. The liquidators said the realization of assets has so far been 'modest' at $255 million. Some $167 million has been 'upstreamed' and linked to Evergrande, however, stakeholders shouldn't assume that all of the money will be available to the company due to complex ownership structures, they said. A previous analysis by Deloitte estimated the recovery rate for Evergrande's offshore unsecured creditors stood at just 3.53%. 'The announcement of Evergrande's delisting could add more pressure to mainland builder shares still trading,' said Ng. 'It's a lesson to investors alerting them to spend more time to understand a company's business when earnings are growing too fast and to study policy shifts.'
Straits Times
05-08-2025
- Business
- Straits Times
Hong Kong's new listing rules seen as helping hot market to stay hot
The changes are designed to encourage more companies to list in Hong Kong, and to set aside enough shares for large institutional investors. HONG KONG – Hong Kong's changes to its listing rules are likely to pave the way for one of the world's hottest markets for initial public offerings (IPOs) to stay hot for longer. That's based on early reactions to the Aug 1 announcement by the local exchange, which handed incentives for big Chinese companies to list in Hong Kong by easing the minimum public float requirement, and ensured that institutional investors get the bulk of shares offered during hot listings. The rules go into effect this week. The changes are designed to encourage more companies – particularly those whose shares already trade in mainland China – to list in Hong Kong, and to set aside enough shares for large institutional investors. The idea is that the moves will help the city's listings markets, which is forecast to double to more than US$22 billion (S$28 billion) in 2025, prolong the rally and solidify its place as Asia's premier financial hub. 'This contributes to a healthier IPO market by promoting price stability and more accurate valuations – ultimately benefiting both the IPO landscape and the broader Hong Kong stock market,' said Kenny Ng, a strategist at China Everbright Securities International. 'While retail investors might appear to lose out due to reduced allotments, the reform also protects them from volatile pricing that can arise from excessive retail demand.' They also represent Hong Kong's latest efforts to bolster the city's standing as a listing destination. Prior to last week, it allowed some companies to file confidentially, and for big firms already listed on the mainland Chinese bourses, Hong Kong promised to speed up the process for listing applications to 30 days. That may not be the end of it. The exchange is conducting a two-month public consultation on whether to lower minimum float requirements for China-traded issuers further to 5 per cent after they are listed. That's after announcing on Aug 1 that their minimum percentage of shares required to be listed when going public in Hong Kong will drop to 10 per cent from 15 per cent. The key to making this work is to limit these benefits to large companies, according to Vincent Chan, a China strategist at Aletheia Capital. Top stories Swipe. Select. Stay informed. Singapore Singapore launches review of economic strategy to stay ahead of global shifts Singapore A look at the five committees reviewing Singapore's economic strategy Opinion Keeping it alive: How Chinese opera in Singapore is adapting to the age of TikTok Life Glamping in Mandai: Is a luxury stay at Colugo Camp worth the $550 price tag? Sport World Aquatics C'ships in S'pore deemed a success by athletes, fans and officials Singapore Strong S'pore-Australia ties underpinned by bonds that are continually renewed: President Tharman World Trump says he will 'substantially' raise tariffs on India over Russian oil purchases Low float requirements 'could pose a problem for smaller firms, as liquidity in the Hong Kong market could become so low that it becomes a concern,' Mr Chan said. 'If a company is large enough, the float requirement doesn't matter as much.' Retail fever The other big change in the exchange's rules involved Hong Kong's unusual system to ensure retail investors don't lose out on highly sought-after IPOs. In such deals, if demand from retail investors is high enough, it triggers a so-called clawback mechanism that increases the number of shares available to them by redistributing stock that had been allocated to institutional investors. The exchange lowered the maximum proportion of shares that can be allocated to retail investors to 35 per cent, down from 50 per cent currently. For retail investors, it could have been worse as the exchange had initially proposed to cut it to 20 per cent. The change aims to minimise the risk of IPOs being overpriced during bookbuilding, which can result in a greater risk of a price slump after listing, the exchange said in a December paper. The retail frenzy around the likes of Mixue Group's Hong Kong debut was so intense that the securities regulator put a cap on margin loans and launched a review of the brokers that were most active in the deals. Louis Wong, director of Phillip Securities (HK), a brokerage popular among retail investors that submitted comments with the exchange, said his firm's trading commissions will likely take a hit from lower allocations to retail investors. But the exchange has to strike a balance between the interests of retail and institutional investors, he said. New listings have fuelled Hong Kong's revival in 2025, driven by a slew of Chinese companies adding an extra listing in the city, including battery-giant Contemporary Amperex Technology's blockbuster deal – the biggest of its kind in 2025 globally. That helped the city reclaim its standing as the world's second-largest market for share sales for the first time since 2012, reversing a years-long slump following the Covid-19 pandemic. The trick now is to extend the streak. BLOOMBERG
Yahoo
09-04-2025
- Business
- Yahoo
Chinese Stocks Bounce Back as Traders Bet on Fresh Stimulus
(Bloomberg) — Chinese stocks climbed for a second day, bucking a worldwide selloff, amid growing speculation that authorities will roll out stimulus to shield the economy from Donald Trump's tariffs. A closely watched gauge of Chinese stocks in Hong Kong (^HSCE) ended 1.4% higher after sliding more than 4% earlier. The onshore CSI 300 ( Index closed up 1%. The moves came as investors shifted their attention to the likely response of Chinese authorities after US tariffs as high as 104% took effect Wednesday. China's top leaders are planning to meet to discuss measures to boost the economy and stabilize capital markets, Reuters reported Wednesday, citing people with knowledge of the matter. 'With the tougher tariffs announced, markets are expecting more government stimulus to boost consumption,' said Kenny Ng, a strategist at China Everbright Securities International. That has encouraged investors to scoop up consumer-driven stocks during the current rally, he said. Mainland Chinese investors bought an unprecedented HK$35.6 billion ($4.6 billion) worth of stocks in Hong Kong on Wednesday. Onshore buyers appear to be unperturbed by the escalating tariff tensions, plowing in more than HK$115 billion since April 2, when the US unveiled the sweeping tariffs. Chinese technology companies were among the most popular stocks during the Wednesday rally. Chipmakers Semiconductor Manufacturing International Corp. ( and Unigroup Guoxin Microelectronics Co. ( soared, buoyed by expectations of AI-related demand. Smartphone maker Xiaomi ( XIACY) closed up 7.7%, its best day since August. Duty-free store operators, which are spared from import taxes, also emerged as big winners. Shares of China Tourism Group Duty Free Corp. jumped 24% in Hong Kong trading. The damage to Chinese companies' earnings from US tariffs is likely to be smaller than the hit to the wider economy, according to Morgan Stanley strategists. Companies in the MSCI China index get only around 3% of their revenue from the US, they wrote in a note. The US tariff on Chinese goods was increased after Beijing retaliated to an earlier announcement. The tit-for-tat moves has raised the specter of a prolonged period of trade tensions that could badly hurt both economies — increasing the importance of a big stimulus push. 'With this trade war, the urgency will be even stronger for them,' said Elizabeth Kwik, investment director of Asian equities at Aberdeen Investments. 'It is already the direction that they were going in anyway, but it's more like a catalyst to speed up and to take some quicker action.' Premier Li Qiang said his country has ample policy tools to 'fully offset' any negative external shocks. Beijing is considering frontloading its stimulus to counter the hit, Bloomberg News previously reported. Chinese authorities haven't immediately responded to the latest tariffs, a departure from previous episodes when Trump hiked duties and officials hit back within minutes. The trade war is providing a test of China's ability to coax the stock market higher during times of turmoil. While Trump has largely shrugged off the market impact, Beijing has pulled out all the stops: easing its grip on the currency, promising loans to state funds, loosening investment rules for insurers and turning to a group of state-backed funds to buy stocks and exchange-traded funds. Inflows into ETFs linked to the so-called national team were 87 billion yuan ($11.9 billion) on Tuesday, hitting an all-time record for the second day running. That suggests state funds stepped in en masse to prop up the market. Chinese state media outlets struck a triumphant tone as these measures helped push markets higher on Tuesday. The China Securities Journal said authorities had developed a more optimized approach to stabilizing markets, and still had room to boost investor confidence. Shanghai Securities News talked of a new stage in the construction of China's capital market stabilization mechanism. With Wednesday's advance, the HSCEI gauge has risen 3.8% over two sessions. The index tumbled almost 14% on Monday to enter a technical bear market as investors braced for the fallout from the spiraling trade conflict. The recent swings in Chinese share prices in Hong Kong have been so extreme that the cost of hedging against further moves is now looking cheap. Implied volatility on the Hang Seng China Enterprises Index is at its lowest level since late October relative to the gauge's realized volatility, according to data compiled by Bloomberg. Investor sentiment remains fragile. Chinese securities brokerages have increased monitoring of their margin financing businesses in response to the volatility, according to local media. 'A lot now hinges on China's response,' said Charu Chanana, chief investment strategist at Saxo Markets. 'A strong retaliation from Chinese authorities could further hurt investor sentiment unless it comes with a massive domestic stimulus — not just policy promises.' —With assistance from Cecile Vannucci. More stories like this are available on ©2025 Bloomberg L.P. Sign in to access your portfolio
