It's default time for Evergrande
Hong Kong shares of the troubled property developer Evergrande continue to tumble bringing the shares with Chinese exposure across the board into risk-off mood:
*CHINA EVERGRANDE IS ON TRACK TO CLOSE AT LOWEST MARKET CAP EVER— zerohedge (@zerohedge) September 20, 2021
"Another Chinese property developer collapsed this afternoon in Hong Kong (dropping a massive 87%) before it was halted. Shanghai based developer Sinic… racing #Evergrande to the bottom. Get ready for a banking crisis in #HK AND #China," Kyle Bass tweets
Another Chinese property developer collapsed this afternoon in Hong Kong (dropping a massive 87%) before it was halted. Shanghai based developer Sinic…racing #Evergrande to the bottom. Get ready for a banking crisis in #HK AND #China pic.twitter.com/nn7LoZkHaw— 🇺🇸Kyle Bass🇺🇸 (@Jkylebass) September 20, 2021
The second largest property developer founder once even bragged that Evergrande could take on Elon Musk's Tesla because they were heavily investing into EV market.
Chinese property giant #Evergrande is on the brink of default after accumulating staggering debt & straying from its core business -- moving into football, bottled water, EVs...— Kristie Lu Stout✌🏽 (@klustout) September 17, 2021
Prompting angry investors to protest at its offices across China
And speculation about its future. pic.twitter.com/eRiQX5bHiM
Now, many fear that the default of the troubled Evergrande could lead to a financial distress of the whole property market in China.
2/3 of dollar indexed high-yield bonds in China are property developers #Evergrande pic.twitter.com/gKFs5IV3Gl— FinTwit (@wallsteetbets) September 20, 2021
It is unclear if Beijing authorities will be stepping in to calm down the situation around Evergrande, but it looks more likely that Beijing will not bail out, at least there are no such messages of them feeling obligated to help Evergrande. Most market players are now sure that China will not encourage the excessive lending players.
The declines about to unfold in the US markets are NOT a result of #Evergrande debt woes. It is a result of excessive valuations atop declining growth outlook. It’s an overdue correction that is a welcome event after we’ve reached pt where almost everyone was long the market.— Brian Tycangco 鄭彥渊 (@BrianTycangco) September 20, 2021
Over the weekend, the management of Evergrande was fully in a damage control mode:
#EVERGRANDE SAYS SIX EXECUTIVES REDEEMED INVESTMENT PRODUCTS IN ADVANCE— Marco Da Costa (@StockMarcoCosta) September 18, 2021
Evergrande continues to say that they will try to meet their obligations. Today, Sep. 20, the company is supposed to meet their interest payments for local loans.