Dozens of people yesterday protested outside the headquarters of Chinese property giant Evergrande Group (恆大集團) after the debt-laden firm said that it was under “tremendous pressure” and might not be able to meet its repayments.
The Hong Kong-listed developer is sinking under a mountain of liabilities totaling more than US$300 billion after years of borrowing to fund rapid growth.
The group was downgraded by two credit rating agencies last week, while its shares tumbled below their 2009 listing price, with a barrage of bad headlines and speculation of its imminent collapse on Chinese social media.
Photo: AFP
An estimated 60 to 70 people gathered outside Evergrande’s headquarters in Shenzhen, China, jostling with police and demanding answers.
Some were contractors owed money, others anxious investors, reporters at the scene said.
“Our boss is owed over 20 million yuan [US$3.1 million] and many people here are owed even more,” a man who gave his surname only as Chen (陳) told reporters. “We are definitely very anxious. There’s no clear explanation right now ... they should have paid the money when it was due.”
Evergrande’s plight has raised fears of a contagion across the debt-mired Chinese property sector — which accounts for more than one-quarter of the world’s second-largest economy — with a knock-on effect on banks and investors.
On Monday, the company said that it would avoid bankruptcy.
However, it issued another statement yesterday to the Hong Kong stock exchange, saying it had hired financial advisers to explore “all feasible solutions” to ease its cash crunch.
The statement warned that there was no guarantee Evergrande would meet its financial obligations.
The firm blamed “ongoing negative media reports” for damaging sales in the pivotal September period, “resulting in the continuous deterioration of cash collection by the group, which would in turn place tremendous pressure on ... cashflow and liquidity.”
Shares in the firm fell more than 11 percent yesterday and are down almost 80 percent since the start of the year.
The company has about 1.4 million properties that it has committed to complete — about 1.3 trillion yuan in pre-sale liabilities as of the end of June — an estimate by Capital Economics said.
“Evergrande’s collapse would be the biggest test that China’s financial system has faced in years,” Capital Economics lead Asia economist Mark Williams said.
Yet “markets don’t seem concerned about the potential for financial contagion at the moment,” Williams said, adding “that would change in the event of large-scale default,” which would likely prod the People’s Bank of China to step in and buttress the teetering developer.
“The most likely endgame is now a managed restructuring in which other developers take over Evergrande’s uncompleted projects in exchange for a share of its land bank,” he said.
The pictures of angry investors outside the firm’s headquarters could also cause alarm in Beijing, where leaders are keen to keep a lid on social unrest.
Some creditors have demanded immediate payback of loans, Bloomberg News reported earlier this month.
Evergrande has already sold stakes in some of its wide range of assets and offered steep discounts to offload apartments, but still reported a 29 percent slide in profit for the first half of the year. It is also struggling to sell its Hong Kong headquarters, even at a loss.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS