Ariel Thoughts on China's Evergrande News 1-28-2024
China Evergrande ordered to liquidate by Hong Kong court
Jan. 28 – REUTERS
A Hong Kong court on Monday ordered the liquidation of China Evergrande Group, a move likely to send RIPPLES through China’s crumbling financial markets as policymakers scramble to contain the deepening crisis.
MARKET REACTION:
Trading in shares of China Evergrande, China Evergrande New Energy Vehicle Group (0708.HK), opens new tab, and Evergrande Property Services (6666.HK), opens new tab was halted. The benchmark Hang Seng Index (.HSI), opens new tab was up 1.2%.
COMMENTARY:
LANCE JIANG, RESTRUCTURING PARTNER, ASHURST
“The market will pay close attention to what the liquidators can do after being appointed, especially whether they can achieve recognition from any of the three designated PRC courts under the 2021 Arrangement regarding Cooperation on Cross-border Insolvency Cases between the Mainland and the Hong Kong SAR. The liquidators will have very limited powers of enforcement over onshore assets in mainland China if they cannot get such recognition.
“If Evergrande is put into bankruptcy administration by a PRC court, international investors will need to see whether the PRC court-appointed administrator can work with the liquidators appointed by the Hong Kong court to achieve a transparent, cooperative and fair restructuring or liquidation of Evergrande.”
CHRIS BEDDOR, DEPUTY DIRECTOR OF CHINA RESEARCH, GAVEKAL DRAGONOMICS, HONG KONG
“Evergrande is a unique case in many respects, but it does underscore that the overall situation for property developers has not meaningfully improved in recent months. In fact, the industry continues to worsen in some ways, such as sales revenue.
“There’s also a fairly clear transmission mechanism for how this impacts the mainland market: homebuyer sentiment. Potential homebuyers are still deeply reluctant to buy presold homes from troubled developers, and we see that reflected in the data.
“This certainly won’t help the sentiment problem.”
FERN WANG, SENIOR RESEARCHER, KT CAPITAL GROUP, HONG KONG
“The ruling should only have limited short-term implications to investor sentiment as it is long in the making. Evergrande’s liquidation ruling should not preclude other troubled property developers from reaching an agreement with their creditors. Developers just need to show that they are willing to work with creditors to come up with a fair and feasible restructuring plan. Sunac, another major troubled developer, managed to reach a restructuring plan with its creditors at the end of last year, showing that it is something doable.
CAI HONGFEI, PROPERTY ANALYST, CENTRAL WEALTH SECURITIES
“I think the impact is limited. Evergrande no longer has ability to operate. It cannot solve its own problem, so has no other choice but liquidation. And the boss has been arrested. Evergrande is a special case.”
Read full article here: https://dinarchronicles.com/2024/01/28/china-evergrande-group-ordered-to-liquidate-by-hong-kong-court/
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