Trading Halt Lifted, Stock Price Drops 80%... Ongoing Concerns Over Chinese Real Estate Instability

Trading Resumes After 17 Months... Approximately 80% Plunge
6 Trillion Deficit in First Half of This Year... Cumulative Over 100 Trillion
Development Companies in Crisis, Chinese Real Estate Market Also Slumps

Evergrande (恒大·Evergrande), one of China's three major real estate developers, resumed trading on the Hong Kong Stock Exchange after 17 months, but its stock price plummeted nearly 80%. This is interpreted as reflecting investors' anxiety over the real estate crisis currently weighing on the Chinese economy.

As of 11:59 a.m. local time on the 28th, Evergrande's stock price was trading at 0.35 Hong Kong dollars, down 78.79% from the previous day. Evergrande's trading had been suspended for about 17 months since March last year, when default crisis rumors surfaced, and resumed trading on this day.

Evergrande's stock price plunge was somewhat expected. According to economic news outlets such as Bloomberg and Nihon Keizai Shimbun on the same day, Evergrande's consolidated operating loss for the first half of this year (January to June) was 33 billion yuan (approximately 6 trillion won).

Evergrande Photo by Yonhap News

Evergrande also posted an operating loss of 66.3 billion yuan (approximately 12 trillion won) in the first half of last year. Although the deficit narrowed compared to last year, it has already continued a three-year streak of losses on a half-year basis. The cumulative net loss over two years from 2021 to last year exceeded 100 trillion won and continues to grow.

It is already facing difficulties in raising funds. According to Bloomberg, Evergrande Group filed for 'Chapter 15' bankruptcy protection in a New York court on the 17th.

Chapter 15 is a regulation that protects foreign companies operating in the U.S. from debt repayment demands and lawsuits by creditors within the U.S. during restructuring efforts. Evergrande's affiliate, Tianhe Holdings, also filed for bankruptcy protection together.

Evergrande is a central company in the current Chinese real estate crisis. It experienced rapid growth riding the Chinese real estate boom in the 1990s and was considered one of China's three major real estate companies alongside Vanke and Country Garden.

However, the business environment deteriorated as the Chinese government tightened real estate-related regulations in 2021. The funding crisis intensified, and in March 2021, Evergrande declared default, leading to a suspension of stock trading.

Meanwhile, as the crisis among real estate developers deepens, the Chinese real estate market is also sinking into a slump. According to the National Bureau of Statistics of China, real estate investment from January to July decreased by 8.5% compared to the same period last year. New construction area and completed area fell by 24.5% and 6.8%, respectively.

Real estate investment, construction, and related service industries are known to account for 25-30% of China's total gross domestic product (GDP).