The shares of China Evergrande Group Limited (EGRNF), a major Hong Kong property developer, experienced a significant surge as trading resumed on Tuesday morning. Despite a down market, the company saw a 15% increase mid-morning, reaching HK$0.37 per share. This surge came after an initial share price of HK$0.45 per share on the market open.
Resumption of Trading for Evergrande and its Real Estate Subsidiary
China Evergrande, along with its real estate subsidiary, China Evergrande Property Services Group Ltd, both resumed trading on Tuesday. Though the subsidiary experienced a brief 20% boost, its shares tumbled by 3% mid-morning in Hong Kong.
Despite the upward trend in Evergrande’s share price, analysts caution that it is driven by speculative bets rather than any fundamental news. Willer Chen, senior research analyst at Forsyth Barr Asia Ltd, notes, “With this volatility, I really don’t know if there’s any chance for any proper investor to make money on this name.”
Speculation on Government Bailout as Investors Eye Chinese Market
As Chinese households invest around a third of their savings in domestic property, there is growing speculation about whether the Chinese government will step in to bail out struggling property firms. Economists suggest that a bailout would boost shares of Chinese property developers but also increase the risk appetite in the world’s second-largest economy. Reports indicate that the Chinese government has approximately $500 billion available to support developers if necessary.
China Evergrande: A Key Player in the Chinese Real Estate Market
China Evergrande, the fourth-largest property developer in China, is currently viewed as a crucial indicator of the Chinese real estate market. The market is currently contending with a credit crisis whose full extent is not yet fully understood. Multi-billion-dollar bond defaults have made Evergrande’s market activity highly volatile in recent months.
Uncertainty Hovers Around Evergrande’s Future
Investors face challenges in predicting Evergrande’s future, as it depends on the decision of a group of secret creditors who hold $15 billion of offshore bonds. Their meeting with the company was scheduled for September 25 to negotiate the restructuring of the company’s delinquent debt. However, Evergrande canceled the meeting abruptly, leading to a plunge in share prices.
Implications for Hong Kong and China’s Markets
Amidst an overall down market, China Evergrande’s bullish performance stands out. Competitors like Country Garden Holdings Company Limited (CTRYY) and Longfor Group Holdings Limited (LNGPF) experienced declines of 4.4% and 5% respectively, while Sunac China Holdings Limited plunged 12%. The Hang Seng Index in Hong Kong was down 3% at 17,278 points, while China’s CSI 300 Index remained flat at 3,690 points.
