The market can’t seem to spend a day without hearing about Evergrande and its possible fallout.
Earlier on Monday, trading on Evergrande, Evergrande Property Services, and the state-back Chinese property developer, Hopson Development, was suspended based on their request.
The report quoted Evergrande’s request as “pending the release by the Company of an announcement containing inside information about a major transaction.”
Chinese media are reporting that Evergrande will sell 51% of its property services unit to Hopson for an estimated amount of USD 5.1 billion. This reported transaction flags several risks for the Chinese economy and the property sector in particular.
At first, it would seem that Evergrande is trying to amass cash to cover its short-term liabilities and that it has yet to give up on surviving. On the other hand, if the transaction details show Evergrande is liquidating its assets at low prices, it would indicate that the company is on the verge of collapsing.
Hong Kong’s Hang Seng index dropped 539 points or 2.19% on Monday following the news.
European stocks opened mostly lower, and U.S. stock futures were also pointing lower.
The company has yet to address the payments it missed on September 23 and 30, even though it had sold a USD 1.6 billion stake of a Chinese bank.
Markets are already treading cautiously amid many other significant issues hounding markets, including the U.S. political dispute and the global energy shortage crisis.
Investors will keep an eye on the official announcement and its implications.