Calling it an “Evergrande Black Monday” may not emphasize enough the dramatic situation that China’s second-largest property developer is going through. The Evergrande Group’s shares plummeted 10.24% on the Hong Kong Stock Exchange, registering an 11 year low (down 85% since the start of the year). Evergrande is trying to show its teeth by demonstrating that it is still able to raise funds — however, its $305b of liabilities do not help the prospects of finding new investors, and the “default” scarecrow is starting to get thrown around.
The company could face a severe restructuring of its business model if no fresh cash is seen. Moreover, to ease liquidity concerns and avoid witnessing the stock fall below $1, Evergrande may need to sell its stake in external businesses such as movie streaming company Hengten Net. On that note, even Hengten Net plummeted 11.2% due to Evergrande’s financial situation.
why it matters
If Evergrande does default, the impact will be felt across the entire real estate and financial sector. Other property stocks such as Sunac and Greentown China have already respectively lost 10.5% and 6.7%, and we're only at Monday...