The chairman of indebted Chinese housing giant Evergrande Group (恆大集團) has told staff that he believes the group will “step out of the darkest moment soon,” state media reported yesterday as Asian stock markets panic over fears the conglomerate will default.
The embattled developer has been struggling to appease angry home buyers and investors as it sways on the brink of collapse with debts exceeding US$300 billion.
Xu Jiayin (許家印), who founded the company in 1996, told staff in a letter to mark the Mid-Autumn Festival that he “firmly believes Evergrande will be able to step out of the darkest moment soon,” the state-run Securities Times reported.
He went on to say Evergrande would increase the full resumption of work and production, ensure the delivery of buildings, and “hand over a responsible answer to home buyers, investors, partners and financial institutions.”
He also thanked staff for their hard work in the letter, as China celebrates a two-day public holiday.
The crisis at one of China’s biggest developers added to an already downbeat mood on trading floors, where dealers were also juggling an expected tightening of monetary policy by the US Federal Reserve, rising COVID-19 infections and a slowing global recovery.
Hong Kong-listed real-estate firms — which took the brunt of the selling on Monday, tanking more than 10 percent — managed to squeeze out gains in the morning as bargain buyers moved in.
However, there remains a lot of uncertainty.
Attention is on what happens next in the Evergrande saga, with the firm — wallowing in debts of more than US$300 billion — due to pay interest to bondholders on two notes tomorrow.
Most experts expect the firm to default on the payments, although it does have a 30-day grace period afterward.
Still, analysts said the nervousness on markets comes from a lack of clarity from leaders in China.
“Even though most people don’t expect Evergrande to collapse all of a sudden, the silence and a lack of major actions from policymakers is making everyone panic,” said Ding Shuang (丁爽), chief China economist at Standard Chartered PLC in Hong Kong. “I expect China to at least offer some verbal support soon to stabilize sentiment.”
Hong Kong’s Hang Seng Index, which plunged more than 3 percent on Monday, added 0.5 percent yesterday.
Markets in Taipei and Shanghai were closed for the festival.
Sydney, Singapore, Manila, Mumbai and Bangkok also rose, although Jakarta dipped and Wellington was barely moved.
London, Paris and Frankfurt rose more than 1 percent in early exchanges.
However, Tokyo’s Nikkei 225 lost more than 2 percent as traders returning from a long weekend played catch-up with Monday’s global sell-off.
Ratings agency S&P said in a report this week that Chinese officials would not likely step in unless they thought the Evergrande crisis could cause widespread risks, although analysts played down any concerns that it could play out like the collapse of Wall Street titan Lehman Brothers Holdings Inc in 2008 during the global financial crisis.
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