Shares in China Evergrande jumped from four-year lows after the heavily indebted property group announced it had resolved a legal dispute with a Chinese bank.
The developer, led by billionaire Hui Ka Yan, is closely followed by regulators, investors and rating agencies, who are concerned about the potential for contagion to China’s financial system and the systemic risks arising from it. The imposing debts of Evergrande.
The shares and shares of the company have been sold since traders on the weekend circulated a court order from Jiangsu province issued earlier this month. which was frozen a Rmb132m bank deposit ($ 20.4 million) for the mainland Chinese division of Evergrande.
Feeling more acidic On Tuesday after authorities in Shaoyang, a city in China’s Hubei province, said sales of two of the company’s projects had been temporarily halted due to a lack of funds in pre-sale accounts.
But Evergrande’s shares, listed in Hong Kong, rose 9 percent Thursday after the company said its legal dispute with China Guangfa Bank over the loan had been resolved.
Evergrande’s offshore dollar bonds matured in 2025 fell to a record low of 47 cents on the dollar Thursday before recovering to about 51 cents, Bloomberg data showed.
Evergrande shares have remained down 46 percent this year.
Last Friday, shares jumped nearly 10 percent a year after the cashless society slashed the prospect of dividing surprise payment this month.
Persistent uncertainties remain over how Hui, China’s oldest richest man, could manage to refinance the group’s vast debts.
“It’s a dead cat jump, but not for long because there are quite a few problems [at Evergrande] yet to be resolved, ”said Louis Tse, general manager of Hong Kong-based Wealthy Securities brokerage, of the stock price rise Thursday.
Fitch, the U.S. rating agency, calatu the Chinese developer last month went from B plus to B for its long-term assessments in foreign currency, a move that reflects pressures on Evergrande to reduce and reduce its debt.
Evergrande’s problems are exacerbated by the Chinese government’s efforts to de-risk the real estate sector. Beijing seeks to reduce the leverage of real estate developers and highlight rapidly rising house prices through a “three-line red” policy, which limits lending between debt to number, net debt to equity and debt to assets.
Goldman Sachs analysts have noted a broad sell-off in Chinese property stocks in recent weeks, with an average of 15 percent of the stock price across the sector since June, pushing companies to valuations. low decades in terms of their price-to-book ratios.
The sale was out of politics and credit crunch from Beijing, which included higher mortgage rates and tighter scrutiny of short-term unsecured debt.
The bank’s analyst said the flow of bad news regarding Evergrande has also been “aggravating market concerns over the general liquidity conditions of the industry”.