China Evergrande Group
has been ordered into liquidation more than two years after its debt struggles kicked off a crisis in the Chinese property sector. It’s a symbolic moment for China’s sprawling real estate industry, which has suffered amid an economic slowdown and become a target of government stimulus.
Evergrande
was ordered to liquidate with more than $300 billion in liabilities by a Hong Kong court on Monday, having failed to deliver on a restructuring plan as intended after a court reprieve in December.
“The time is for the court to say enough is enough,” Judge Linda Chan said in court, after an 11th-hour push by creditors to reach a deal over the weekend, The Wall Street Journal reported. It ends a yearslong saga during which Chinese state authorities attempted to manage the company’s debt restructuring. Evergrande filed for U.S. bankruptcy protection last August.
Shares in Evergrande plunged more than 20% in Hong Kong on Monday before trading was suspended. The stock has fallen more than 99% since before the seriousness of its debt issues came to the fore. Hong Kong markets were little moved by the news, though, with the
Hang Seng Index
gaining 0.8% on Monday and the
Hang Seng
Properties index rising 0.6%.
Evergrande was once the largest real estate group in China—and also its most indebted, with its descent into distress in late 2021 rattling global investors and marking one of the first major cracks in China’s property industry.
Dozens of Chinese developers have since defaulted, with the sector coming into sharp focus amid a slowdown in the world’s second-largest economy over the past year. There have been numerous government stimulus pushes marking attempts to shore up developers, which are also highly entangled in China’s financial system.
More signs of easing in the Chinese property sector came over the weekend against the backdrop of Evergrande’s liquidation. The city of Guangzhou relaxed purchase restrictions for large homes and redefined terms of homeownership in moves seen as boosting the local real estate market. Chinese regulators have also called for more city-level coordination for property financing.
“We see more easing measures likely on the horizon, albeit gradually, as cities and provinces look for ways to revive the economy,” Mark Haefele, the chief investment officer at UBS Global Wealth Management, wrote in a Monday note. “Overall, while a property sales recovery remains key to bolster investor confidence, we think recent moves by the Chinese government belie Beijing’s focus on growth, and are in line with our base case of a step-up in policy support this year.”
Write to Jack Denton at jack.denton@barrons.com
Read the full article here