China Evergrande shares slump after resuming trading and posting loss

Developer's market value falls to $586m

Embattled Chinese developer Evergrande filed for bankruptcy protection in the US on August 17. AFP
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China Evergrande Group slumped as much as 87 per cent in Hong Kong trading following a 17-month halt, becoming a penny stock as the country’s most-indebted developer unveiled more losses.

The decline to HK$0.35 on Monday morning shrank its market value to $586 million, from a peak of more than $50 billion in 2017.

The company, which is undergoing a lengthy debt restructuring process, reported a loss attributable to shareholders of 33 billion yuan ($4.5 billion) for the six months ended June 30, according to a filing to the Hong Kong stock exchange on Sunday.

That adds to more than 582 billion yuan of losses ($79 billion) from the previous two years, the first on an annual basis since its 2009 listing.

Evergrande had applied to resume trading after saying improved internal control systems and processes met its obligations under Hong Kong listing rules.

The stock last traded on March 18, 2022, with the company having lost over 95 per cent of its market capitalisation from its peak.

The first-half results came before creditor meetings scheduled for Monday and underscored Evergrande’s struggles during the housing crisis that has rocked the world’s second-largest economy over the past two years.

Many developers have been hit as China clamped down on the booming property industry to cut risk and make homes cheaper.

Evergrande’s largest peer, Country Garden Holdings, is on the verge of default and is expected to post a loss for the first half of the year.

Evergrande’s total net loss during the first half amounted to 39.3 billion yuan, according to Sunday’s filing.

The developer also reported aggregate liabilities of 2.39 trillion yuan at the end of June. Excluding contract liabilities of 604 billion yuan, the tally stood at 1.78 trillion yuan, up from 1.72 billion yuan in 2022.

Evergrande had total assets of 1.74 trillion yuan, including total cash, cash equivalents and restricted cash of 13.4 billion yuan, the company said in its filing.

The results give offshore bondholders more to digest as they consider the company’s debt restructuring proposal. The defaulted developer has also asked to convene meetings for creditors to approve its offshore debt overhaul plan on Monday.

In April, Evergrande said investors holding 77 per cent of its class A bonds backed the plan while only 30 per cent of Class C holders endorsed it.

The financial results were reviewed by Prism, a small accounting company named as Evergrande’s auditor in January after PricewaterhouseCoopers resigned.

Prism did not issue a conclusion on the interim earnings report, citing numerous uncertainties.

Updated: August 28, 2023, 3:57 AM