Chinese markets return from break to more Evergrande angst

Chinese Estates Holdings

08/10/2021 24:16

Oct 8 (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  3333.HK  is facing one of the country's
largest-ever defaults as it wrestles with more than $300 billion
of debt.
    The company last month missed coupon payments on two dollar
bond tranches. The possible collapse of one of China's biggest
borrowers has triggered worries about contagion risks to the
property sector in the world's second-largest economy, as its
debt-laden peers are hit with rating downgrades on looming
defaults.
    Bloomberg reported on Thursday that some dollar bondholders
were invited by advisers to a call on Friday 0630 EST (1030 GMT)
to discuss strategy and how to broaden the group.  urn:newsml:reuters.com:*:nL4N2R331W 
    A group of bondholders previously selected investment bank
Moelis & 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.  urn:newsml:reuters.com:*:nL8N2QI4C5     
    Chinese regulators have not made any comments specifically
on Evergrande during the week-long holiday from Oct. 1, although
the central bank last Wednesday urged financial institutions to
co-operate with relevant departments and local governments to
maintain the "stable and healthy" development of the property
market and safeguard housing consumers' interests.
    Investors have been waiting to hear from the company after
it requested a halt in the trading of its shares in Hong Kong on
Monday pending an announcement about a major transaction.
Evergrande Property Services Group  6666.HK , a spin-off listed
last year, also requested a halt and said it referred to "a
possible general offer for shares of the company." 
    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. 
    An index of China high-yield debt  .MERACYC , which is
dominated by developer issuers, has been sliding through the
week and is down more than 21% since May. It could soon see
spreads at their widest ever.
    The property sector’s troubles mounted during the Golden
Week break. Two Hong Kong property agencies said they are suing
Evergrande over unpaid commissions, while bonds of other
property firms such as the Kaisa Group  1638.HK , Central China
Real Estate  0832.HK  and Greenland  600606.SS  were battered by
the uncertainty.  urn:newsml:reuters.com:*:nL8N2R13LL
    Still, sentiment improved slightly on Thursday with the
U.S.-traded Chinese stocks Alibaba Group Holding  9988.HK  and
Tencent Holdings  0700.HK  each surging about 8% as concerns
around U.S.-China trade relations and Evergrande's debt crisis
appeared to ease.  urn:newsml:reuters.com:*:nL1N2R32IN

 (Reporting by Vidya Ranganathan, additional reporting by Megan
Davies in New York; Editing by Sam Holmes)
 ((megan.davies@thomsonreuters.com; +1 646 223 6190;))