[Asia Economy Reporter Cho Hyun-ui] Shares of Evergrande Group, China's largest real estate developer engulfed in bankruptcy rumors, surged more than 30% intraday on the 23rd.
According to Bloomberg News, Evergrande's stock price soared to 3,000 at 10:53 a.m. that day, up 32.2% from the previous trading day. This is the largest increase since November 2009.
The Hang Seng Index also rose to 24,827.46, up 2.5% compared to the previous trading day, at one point that morning.
It appears that Evergrande's statement the day before, announcing that it had "resolved" the issue of interest payments on yuan-denominated bonds, influenced the market. However, Bloomberg pointed out that "Evergrande issued an ambiguous statement regarding bond interest payments, creating new uncertainty in the market."
Evergrande is required to pay $83.5 million (approximately 99.3 billion KRW) in interest on dollar bonds and 232 million yuan (approximately 42.5 billion KRW) in interest on yuan bonds that day. If Evergrande fails to repay bond interest, it will face a default crisis, but the company did not specifically mention whether it would pay interest on dollar bonds in its statement the day before.
Market analysts suggest that Evergrande may have employed a stopgap measure such as negotiating with bond-holding institutions to extend the full or partial payment deadline for interest.
In fact, even Chinese Estates Holdings, Evergrande's second-largest shareholder, is reportedly pessimistic about Evergrande's chances of recovery.
According to CNN and others, Chinese Estates Holdings is currently considering selling all of its Evergrande shares. The company sold 108.9 million Evergrande shares for 246.5 million Hong Kong dollars (approximately 37.5 billion KRW) from the 30th of last month to the 21st of this month and plans to sell the remaining 751.1 million shares as well.
Bloomberg explained, "If Chinese Estates Holdings liquidates all its shares, the company will incur a loss of about 9.5 billion Hong Kong dollars (approximately 1.4446 trillion KRW)."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
