Stock Groups

China Evergrande’s Main Unit Suspends Bond Trading, Shares Tumble By


© Reuters

By Gina Lee – China Evergrande Group (HK:) shares slumped almost 10% after its main unit, Hengda Real Estate Group Co. Ltd., on Thursday.

China Evergrande shares plunged 9.61% at HK$2.54 ($0.32) in the morning ET (04:30 GMT).

Hengda’s application comes after it was notified by rating agency China Chengxin International on Sep. 15 that the bonds’ ratings had been downgraded to A from AA, according to a stock exchange filing. The filing also stated that both the issuer rating and the bond ratings were placed on a watchlist for possible further downgrades.

This application comes at a time when both Shanghai and Shenzhen stock markets have repeatedly stopped trading the bonds due to volatility trade.

Also, the unit applied to stop trading in onshore corporate bonds one day. After Sep. 17, trading will resume on Shanghai and Shenzhen. The unit’s bonds traded on these exchanges won’t change hands unless negotiated transactions are used.

A bond trader, who did not want to be named, said that the changes made in the trading system were likely intended to limit participation and reduce volatility.

“Many businesses would modify the trading system of their bonds before default.” he stated.

On Wednesday, the company’s Shenzhen-traded January 2023 bond trade at CNY24.99. The Shanghai-traded May 2020 bond trade at CNY30.

The 8.75% China Evergrande June 2025 dollar bond trades at 29.375cs on Thursday morning. That’s a slight increase of 4 cents over Wednesday’s lows.

China Evergrande is continuing to try and avoid a crisis in its debt. It’s currently balancing between a chaotic meltdown, managed collapse, or the most likely possibility of a bailout from the government.

Concern is also mounting that the property developer’s cash crisis could impact other Chinese high-yield issuers. A Chinese index of high-yield debt declined to 374.646 early in the day. This is its lowest level since April. 14. 2020.

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