By
Chimamanda U. Martha
October 17th, 2023
Evergrande is expected to pay $83.5 million interest on September 23 for its March 2022 bond.
China Evergrande Group (HKG: 3333) stock dropped nearly 4% today as recent behavior depicts a collapsing business. China’s second-largest property developer by sales is now in a collapsing mode, according to the editor-in-chief Hu Xijin of a state-backed Chinese newspaper, Global Times.
According to the company’s update, it is likely to default on some of the loans, as it remains under liquidity crisis. Notably, Evergrande is expected to pay $83.5 million interest on September 23 for its March 2022 bond. Additionally, the company is due to pay another $47.5 million in interest on September 29, 2021, for its March 2024 bond. However, the company has the chance of 30 more days to clean up its records and remain not having defaulted the interest payments.
Xijin noted that the capability of the company’s ability to trigger a systemic financial crisis similar to the collapse of Lehman Brothers is unlikely.
However, his sentiments are not similar to Mark Williams, a chief Asia economist at Capital Economics. According to Williams, Evergrande’s collapse would be the biggest test that China’s financial system has faced in years.
The company has struggled to keep its business with notable liquidity to pay suppliers on time. Additionally, the company was hard hit when China introduced rules to rein in the borrowing costs of developers.
Over time, the market crisis that has sustained month after month has kept the company down and investors shying away. Rating agencies have already downgraded the company on reports of a liquidity crisis, particularly in the foreseeable future.
Evergrande Stock and the Market Outlook
According to market analytics provided through CNBC, Evergrande stock has declined approximately 82% since the calendar flipped on January 2021. The company has a reported market valuation of $6,165.76 million. In the past 10 days, Evergrande stock had an average volume of $138.86 million. In the past 52 weeks, the Evergrande stock has ranged between HK$ 20.30 and HK$ 2.28.
The huge drop has been a warning call to most analysts, who have warned of possible further drop. Especially should the company default subsequent loan repayments.
Analysts are forecasting that a fall of Evergrande and its business could spell catastrophic nature in the Chinese market. This is particularly because investors are likely to lose confidence in the country’s assets from a broad spectrum.
Analysts anticipate a possible banking crisis should the loans be defaulted in large terms. Mind you $300 billion is a notable amount to cause financial strains to the lenders.
China Minsheng Banking Corp, one of Evergrande’s major lenders, the stock market dropped approximately 4.6% to a record low of HK$2.80.
Read more about stock market news here.