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Cost of borrowing Evergrande stock hits new high on debt fears By Reuters

by Mike Robinson

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© Reuters. The headquarters of China Evergrande Group is located in Shenzhen (Guangdong province), China, September 26th, 2021. REUTERS/Aly Song

SINGAPORE (Reuters) – The cost of borrowing China Evergrande shares rocketed last week, data from research firm FIS Astec shows.

The short sellers take out shares and then sell them to try to get them back at a better price. According to FIS Astec data, September 23rd shows that they are currently paying annualised rates 92%.

This is an increase of 50% from two weeks ago.

According to data, only 2.2% are on loans for Evergrande. China’s developer is in debt of $305 billion and is currently short of cash. The share price has fallen 83% since this time last year.

According to market participants, the rise in borrowing costs is a result of both growing enthusiasm to take short positions and the scramble for stock to lend as the lenders recall shares in order to liquidate positions.

FIS Astec reports that borrowing costs have increased for other developers, although not in the same way.

Annualised rates for Guangzhou R&F Properties’ shares, for example, rose from less than 1% at the start of the month to 6.6% on Sept. 23.

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