China Evergrande halts trading amid Chairman's detention
Trading in the shares of China's debt-ridden property sector giant Evergrande and two of its subsidiaries was halted on Thursday. This happened following reports that the company's Chairman, Hui Ka Yan, has been taken into police custody and is under surveillance at a specific location. The pause in trading further adds to Evergrande's troubles as it grapples with over $300 billion in debts.
Restructuring plans complicated by investigation
Evergrande has been hustling to get creditor approval for restructuring its offshore debt, but things got messier this week after the company said it couldn't issue new debt because of an investigation into its main China unit. Analysts think that the offshore debt restructuring plan might flop, raising the risk of liquidation for the company. Reports suggest that a major offshore creditor of Evergrande is preparing to file for liquidation if new debt restructuring plan isn't presented by October end.
Impact on China's property sector and economy
The Evergrande situation has major implications for China's property industry and the broader economy. Although no developer is seen as immune to failure in China, the government could intervene to maintain stability through various means. Beijing has recently acted by reducing existing mortgage rates to boost the ailing property sector. However, surplus housing supply in smaller cities facing declining populations is projected to persist for several years. This has led to buzz about defaults, restructuring, and liquidation of insolvent developers.
Evergrande's future amid regulatory easing
Even with recent regulatory moves aimed at steadying China's housing market, Evergrande's future is still up in the air. The company's shares have nosedived 81% since trading started again in late August after a 17-month suspension. As this situation continues to unfold, losses for shareholders, bondholders, banks, and investors in trust and wealth management products tied to property projects are expected. The outcome of Evergrande's crisis will likely leave a lasting mark on China's property sector and the global economy.
