The woes of debt-ridden Chinese property giant Evergrande just got a whole lot worse after 87 per cent of its market value was wiped away in less than a month.
Of that, 25 per cent was lost in a single day, on Monday local time, following some bad news for investors.
Evergrande has been caught in a “death spiral” since 2021 with $US300 ($A468) billion in liabilities and for more than two years it has been on the brink of collapse, pausing its trading indefinitely while trying to come up with a solution.
But after announcing a debt restructuring plan, the developer relisted on the Hong Kong stock exchange on August 28.
It’s been a bloodbath ever since then with shares trading as low as 41 Hong Kong cents (A82c) on Monday, essentially rendering it a penny stock.
Then the property giant said it would delay a debt restructuring meeting due Monday, causing its worth to plunge by a further 25 per cent.
On the Friday before the meeting was supposed to take place, Evergrande filed a document to the Hong Kong exchange outlining that its debt restructuring plan had to change as their re-entry into the stock market had not gone as planned.
“The sales of the Group has not been as expected by the company” since its March debt restructuring announcement, Evergrande wrote.
As a result, Evergrande said it “considers it necessary to reassess the terms of the proposed restructuring to meet the company’s objective situation and the demand of the creditors”.
Evergrande Group said it “is unable to meet the qualifications for the issuance of new notes under the present circumstances” due to a regulatory probe.
And in what has been dubbed as the Evergrande contagion, the company’s failures have rubbed off on other property developers who are now also suffering from massive share price drops.
The Hang Seng Mainland Properties index slid by more than four per cent on Monday in the wake of the news while broader Chinese real estate stocks are down 2.5 per cent, as investors once again grow doubtful that the company can save itself.
Individually, other real estate stocks also plunged.
Country Garden was down 7.69 per cent, Logan Group slumped 7.95 per cent and R & F Properties was down 6.62 per cent on Monday local time.
And fears continue to grow that China’s biggest builder, Country Garden, is on the brink of default with its plunging value. It was given a temporary reprieve last week after Chinese creditors again approved an extension on repayments for a set of bonds.
Earlier this month, the Chinese Communist Party began pursuing the company’s big players with allegations of fraud.
Evergrande’s wealth management unit in Shenzhen, southern China, was raided at the weekend. Several of its staff have been detained on suspicion of “illegal fundraising”.
“Recently, public security organs took criminal compulsory measures against (general manager) Du (Liang) and other suspected criminals at Evergrande Financial Wealth Management Co,” Shenzhen Nanshan District Police Bureau said on Saturday.
No further details were provided.