Evergrande Property Services Group, the property services arm of the embattled Chinese property behemoth Evergrande, witnessed a devastating collapse in its shares on Thursday, wiping out a staggering half of the firm's market value. This abrupt downfall occurred as trading resumed after more than a year of suspension.
Once the crown jewel of China's real estate developers, Evergrande now finds itself drowning in an overwhelming sea of debt, which has transformed it into a symbolic representation of the country's ongoing property crisis, causing ripple effects throughout the world's second-largest economy.
Last year, trading in Evergrande and several of its listed subsidiaries in Hong Kong came to a grinding halt due to their failure to meet financial results release deadlines. However, in June, Evergrande Property Services Group finally disclosed its earnings, revealing a net profit of 1.48 billion yuan ($206 million) for 2022, a remarkable turnaround from a net loss of 388.8 million yuan ($54 million) the previous year.
Despite this glimmer of hope, traders on Thursday were unfazed and decided to offload their shares in the company, causing its stock price to plummet by a staggering 50 percent, resulting in a jaw-dropping $1.6 billion loss in market value.
This recent selloff follows the alarming fate of Evergrande's electric vehicle subsidiary, which also experienced a shocking 60 percent plunge on its first day back after suspension.
It is noteworthy that trading in Evergrande's parent company, China Evergrande, remains suspended, despite the release of its financial results. The real estate giant has earlier this year proposed a debt restructuring plan, offering creditors the option to convert their debt into new notes issued by the company and equities in two of its subsidiaries.
A significant concern on the horizon is the winding-up petition filed against Evergrande, scheduled to be heard in a Hong Kong court, now pushed back to October, adding more uncertainty to the already volatile situation.
The financial turbulence for Evergrande first emerged in 2021 when it defaulted on its bonds, causing widespread concerns about potential contagion that could spread globally and affect the overall stability of the economy.
Notably, Chinese developers have faced mounting pressure, leading to protests and mortgage boycotts from homebuyers after numerous housing projects were not delivered as promised.
In response to the crisis, Beijing has made efforts to bolster the real estate sector by cutting mortgage rates, streamlining bureaucratic processes, and offering increased financial support through loans to developers. However, the road to stability remains uncertain as the Evergrande saga continues to unfold, leaving investors and the global financial community on edge.
