A Hong Kong court handed down a liquidation order against China Evergrande Group on Monday, initiating the dissolution of what was once China’s biggest real estate developer.
This move signals a critical turning point for the debt-laden giant, sparking spillover concerns across the financial community.
Evergrande’s shares took an immediate hit following the court’s ruling, plummeting 21% to just 16 cents in Hong Kong dollars before a suspension in trading. This significant drop in share price is a far cry from its 2017 peak market value of HK $414 billion, now dwindled to merely HK $2.15 billion.
Evergrande CEO Shawn Siu said “the company has made all efforts possible and is sorry about the winding-up order.” He maintained a commitment to clients and the company’s continuity, emphasizing, “The company will ensure home deliveries and steadily promote normal operation of the group.” Siu also confirmed plans to work alongside the appointed liquidator in managing the fallout.
Alvarez & Marsal Inc. stepped in as the appointed overseer, a firm recognized for handling Lehman Brothers‘ restructuring.
Evergrande’s Fallout: Assessing The Economic Impact
The decision, while not unforeseen, sends a chilling message to the markets and the property sector in China, which is already navigating turbulence.
According to Andreas Steno Larsen, an independent macro economist, the court ruling on Evergrande was largely anticipated given the company’s well-documented financial woes.
“This ruling doesn’t come as a surprise to the markets,” Larsen said, adding that the government’s reluctance to intervene in the company’s $300-billion debt crisis has been mirrored in Evergrande’s declining share price. He anticipates Beijing will likely introduce additional policy measures and economic incentives to alleviate market instability.
FREE Evergrande Update… Popping the World’s Largest Asset Bubble.. Evergrande has now formally transitioned from a state of de facto default to a legal liquidation. How will the markets and Beijing act to the latest ruling?More -> https://t.co/Y8cV8Pb6Gc pic.twitter.com/2Rh1uDlPDi
— AndreasStenoLarsen (@AndreasSteno) January 29, 2024
Bloomberg reported the negative news is expected to impact the already shaky confidence of Chinese homebuyers, who are increasingly…
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