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Evergrande - Chinese property giant in trouble

Monday we have seen the stock market as a whole trend downwards on economic fears with news of Evergrande, Chinas second largest property developer possibly facing bankruptcy. This is as the property developer has a payment deadline looming after they aggressively became one of China's biggest companies by borrowing $300bn.

Shares in Evergrande (3333.HK) has been in a rush to raise funds to pay many lenders, suppliers and investors. At close the shares finished 10.2% down at HK$2.28 a share on Monday after earlier plummeting 19%.

The first big test comes this week where Evergrande is due to pay $85.5 million in interest relating to its March 2022 bonds. It has another $45.5 million due on Sept 29th for March 2024 notes.


We may be surprised but Evergrande doesn't just do real estate.
They have subsidiaries in Sports, Automotive, Tourism & entertainment, Health, Media, Finance, Food and Music.


Even more worryingly is that this could have a domino effect across the world. Some of the largest emerging market funds such as Ashmore Group, BlackRock Inc, UBS Group and HSBC Holdings have a substantial amount of Evergrande Bonds which are already having a trickle down effect. With the infographic bellow showing the amount invested by the millions of dollars.

Ashmore Among Top Funds With Exposure to China's Evergrande - Bloomberg


HSBC Holdings has around $200 million of Evergrande Bonds and as a result HSBC has halted mortgages for Evergrande projects in Hong Kong. It is believed other banks could follow suit in refusing mortgages for Evergrande properties.

 

The Dividend Experiment

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I saw this earlier, thought it was interesting. Shame that I own so much RIO haha

Companies and China exposure

Data: Liberum/Bloomberg

 
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Smart Finance

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I saw this earlier, thought it was interesting. Shame that I own so much RIO haha

Companies and China exposure

Data: Liberum/Bloomberg

A huge amount of miners reliant on them which is quite worrying. Sure the Chinese Gov will swoop in.
 

Smart Finance

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Update in the Evergrande saga.
They are looking to raise $1.5 billion as debt payment looms. They are looking to raise money by selling its $1.5 billion stake in a commercial bank. The bank is 20% state owned as is thought to be bought back by the bank itself.

Though this excerpt is interesting as "Under the agreement announced to the Hong Kong Exchange, the proceeds of the sale will be used to settle Evergrandes financial liabilities due to Shengjing bank.
This suggests that Evergrande will not be able to use money raised by the sale for other purposes, including the interest payments for the overseas bonds on Wednesday."

This could cause some anger amoung foreign investors/bond holders.

BBC News - Evergrande: Struggling firm to raise $1.5bn as debt payment looms https://www.bbc.co.uk/news/business-58729791