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Chinese markets return from break to more Evergrande angst By Reuters

© Reuters. An elderly man is seen walking past the No Entry sign at China Evergrande Group headquarters, Shenzhen in Guangdong Province, China on September 26, 2021. REUTERS/Aly song/Files

(Reuters) – China’s markets return on Friday after a seven-day break with barely any fresh insight of how regulators propose to contain the contagion from cash-strapped China Evergrande Group’s debt problems or even the firm’s own plans to sell its units.

Evergrande faces one of its largest defaults in history as it carries more than $300 billion worth of debt.

Last month the company failed to pay coupon payments for its two dollar tranches of bond bonds. As its debt-laden counterparts are being downgraded due to looming defaults, concerns have been raised about the possible collapse of China’s largest borrower.

Bloomberg reports that advisors invited some bondholders in dollars to join a conference call at 0630 EST (1130 GMT) Friday to talk strategy and expand the group.

A group of bondholders previously selected investment bank Moelis (NYSE:) & Co and law firm Kirkland & Ellis as advisers on a potential restructuring of a tranche of bonds, two sources close to the matter said in September.

Although Chinese regulators did not make any comment on Evergrande over the weeklong vacation that began Oct. 1, the central bank last Wednesday called for financial institutions and other local authorities to cooperate with them to ensure the stability and health of the market, and protect the interests of housing consumers.

The company requested that trading be halted in Hong Kong for Monday in order to make an announcement on a major transaction. Investors have been patiently waiting. Evergrande Property Services Group, which was a spinoff of Evergrande, requested an halt on Monday. It stated that it was referring to “a general offer for shares”

While a sale of assets would temporarily ease concerns around Evergrande’s cash flows, analysts also reckon the indebtedness of Evergrande and some other Chinese property firms is too large to be resolved quickly.

The index of China’s high-yield Chinese debt is being dominated by developers. It has fallen more than 21% in the past week. Spreads could reach their highest level ever soon.

The property sector’s troubles mounted during the Golden Week break. Evergrande is being sued by two Hong Kong-based property agencies for unpaid commissions. Meanwhile, bonds from other property companies like the Kaisa Group and Central China Real Estate were weakened due to uncertainty.

Still, sentiment rose slightly with U.S.-traded Chinese stocks Alibaba (NYSE:] Group Holdings and Tencent Holdings both grew by around 8%, as worries about U.S.-China relations and Evergrande’s debt crisis seemed to be easing.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.