In the wake of the real estate crisis in China, trading in shares of the heavily indebted Evergrande Group has been stopped on the Hong Kong stock exchange.
In addition to the papers of the Evergrande Group, shares of the Evergrande Property Services Group and the Evergrande Group for electric vehicles could not be traded, as stated in three announcements from the Hong Kong stock exchange on Thursday. No reason was given.
The suspension of trading in Evergrande shares follows recent media reports about investigations against the company’s employees. On Wednesday, the Bloomberg news agency reported that CEO Hui Ka Yan had been placed under police control. China Evergrande did not comment on this when asked. The Foreign Ministry in Beijing also did not provide any details when asked about the media report at its daily press conference in Beijing. “I don’t have the information you’re talking about,” said spokeswoman Mao Ning.
China’s real estate industry is currently experiencing a serious crisis. Evergrande is a giant in the sector, but with the equivalent of an estimated 311 billion euros in liabilities, it is the most indebted company. Around two years ago, concerns about the company going bankrupt brought back memories of the global financial crisis of 2008, which was heralded by the insolvency of the US investment bank Lehman Brothers. Last year, Evergrande Group shares were suspended from trading for months. When this resumed at the end of August, the paper fell by 80 percent.
The group is expected to restructure its debt according to Chinese specifications. But new bad news keeps coming: On Monday, the group based in Shenzhen, southern China, announced that it had missed payment on a bond plus interest worth the equivalent of around 529 million euros. The company had previously postponed meetings with creditors. On Sunday, the group announced to the Hong Kong stock exchange that an investigation was underway against its subsidiary Hengda Real Estate Group.
In addition to Evergrande, the real estate developer Country Garden, which operated thousands of construction projects in China, recently hit the headlines as another giant in the market due to problems. A crisis in the sector is a danger for China. The real estate industry is an important driver of the People’s Republic’s gross domestic product. The sector has so far contributed more than a quarter of economic growth annually.
The crisis in real estate companies is therefore a problem for the economy in the Middle Kingdom. The possible consequence: If China is doing poorly economically, this could have an impact on the global economy, and thus also on Germany. Many German companies manufacture in China. The country with around 1.4 billion inhabitants is also an important market, for example for the automotive industry.
One reason real estate groups are currently struggling and heavily indebted is demand. Since the construction boom in the noughties after the turn of the millennium, real estate companies have been going uphill. People invested in real estate, which promised stability unlike the stock market. According to experts, the real estate companies immediately used the income to build new buildings and buy land. However, because demand for housing fell and prices fell, construction companies were no longer able to complete their projects or service their creditors.
In the meantime, videos of angry apartment buyers who suddenly found out that the apartment they had already paid for could no longer be finished were circulating on the Internet. It has also been more difficult for highly indebted companies to obtain financing since 2020. The communist government under state and party leader Xi Jinping introduced the “three red lines” policy. The home should be used again as an apartment and not for speculation.
/jon/DP/tih
HONG KONG (dpa-AFX)
Selected leverage products on China Evergrande Group
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on China Evergrande Group
The leverage must be between 2 and 20
Advertising