Evergrande crisis deepens

A great way to start the new year – a potential Chinese housing crash that could spillover to Australia? Evergrande has been put into a trading halt in Hong Kong yesterday – more from ABC:

Troubled Chinese property giant Evergrande’s shares have been suspended from trading on the Hong Kong stock exchange.

The company did not give a reason for the halt.

The news came after Chinese media reported that Evergrande had been ordered to demolish 39 luxury apartment buildings on the tropical island of Hainan within 10 days.

The Ocean Flower Island project, a mega-resort under development by Evergrande, consists of three reclaimed Islands in Danzhou in Hainan province.

And is struggling to repay its creditors, selling assets in firesales to clear out mountains of debt – over $300 billion –  after last week failing to make interest payments on its offshore bonds.

From BBC:

Last week, the company dialled back plans to repay investors in its wealth management products. Evergrande said on Friday that each investor in its wealth management product could expect to receive $1,257 each month as principal payment for three months irrespective of when the investment matures.

The company had earlier not mentioned any amount and had agreed to repay 10% of the investment by the end of the month when the product matures.

Evergrande said in a statement posted on the wealth unit’s website that the situation was not “ideal” and that it would “actively raise funds”, and update the repayment plan in late March, without giving further details.

The announcement was seen as highlighting the deepening cash squeeze at the struggling property developer.

The company’s $19bn in international bonds were deemed to be in default by rating agencies after it missed a payment deadline last month.

Given the huge amount of personal savings that domestic Chinese investors have trapped in the property bubble, the efforts by the Chinese Communist Party to restructure Evergrande without bailing them out externally better work, or this contagion could spread very quickly.

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