The first day of trading in Hong Kong for over a year and a half saw almost an 80% decline in shares of the troubled Chinese real estate developer Evergrande. As a result of Beijing’s crackdown on real estate companies, the shares have lost more than 99% of their value over the previous three years.
The second-largest economy in the world is threatened by the real estate market crisis that has Ever Grande at its center. The company reported a 33 billion yuan ($4.5 billion; £3.6 billion) loss for the first half of the year on Sunday. That was better than the loss of 66.4 billion yuan it posted for the same period last year, though.
Directors of the firm “have taken a number of measures to improve the liquidity position and financial position of the group,” Evergrande stated in a statement to the Hong Kong Stock Exchange.
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Sales Success, Cash Challenge
The company also stated that its sales for the first half of this year increased by 44% to 128.2 billion yuan over the same period last year. But throughout that time, its cash reserve shrank by 6.3%. Trading in Evergrande’s shares has been halted since March of last year.
In order to minimize financial contagion and reduce spillover into the wider financial system, governments must act now, according to Qian Wang, chief Asia Pacific economist at investment company Vanguard, who told the BBC.
She continued, Policymakers will need to further support the economy and the real estate sector with liquidity and credit. Concerns regarding the post-pandemic recovery of the second-largest economy in the world have increased as a result of issues in China’s real estate market.
In an effort to “revive the capital market and strengthen investor confidence,” China reduced its 0.1% stock trading fee by half on Monday. The announcement caused major stock indices in Hong Kong and mainland China to increase.
The action was taken a few days after the nation’s central bank lowered one of its major interest rates for the second time in three months in response to sluggish consumer spending and declining exports.
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Source: BBC
