The Evergrande Group, the world’s most indebted real estate developer, announced a significant contraction in its net loss for the first half of the year, thanks to higher revenues due to the “brief real estate market boom” earlier this year.
But its shares fell more than 70% on Monday after it resumed trading after a 17-month suspension, even as shares in most Chinese real estate firms traded higher after Beijing eased further real estate measures.
For years, the Shenzhen-based company has been one of the largest real estate developers in China in terms of sales. But it borrowed heavily to fund its expansion and defaulted on its debt in 2021, sparking a crisis in China’s real estate sector, which accounts for up to 30% of the country’s economy. Earlier this month, it filed for bankruptcy in the US.
Investors are closely watching its progress due to the major role it has played in China’s current economic woes.
Evergrande said in a report that Evergrande’s loss attributable to shareholders amounted to 33 billion yuan ($4.5 billion) in the January-June period, down 50 percent from the loss of 66.4 billion yuan ($9.1 billion) recorded in the same period last year. Sunday filing to the Hong Kong Stock Exchange. Revenue rose 44 percent from a year earlier, to 128.2 billion yuan ($17.6 billion).
The company said it “actively planned for the resumption of sales and succeeded in taking advantage of the brief boom in the real estate market that appeared at the beginning of the year.”
China’s economy has enjoyed a strong start to the year, thanks to a post-opening rally after the country lifted its strict coronavirus restrictions. But that recovery has petered out since April.
Evergrande incurred a combined loss of $81 billion during 2021 and 2022, according to a long-awaited financial report published last month.
And its challenges are not over yet. Evergrande still had 2.39 trillion yuan ($328 billion) in liabilities as of the end of June. This is slightly lower than the total liabilities it reported at the end of last year of 2.44 trillion yuan ($334 billion).
Its total assets also fell to 1.74 trillion yuan ($239 billion) from 1.84 trillion yuan ($253 billion).
Evergrande is undergoing a government-directed debt restructuring process, which began in late 2021 shortly after it defaulted on its debt.
In March this year, it unveiled a multi-billion dollar plan to make peace with its international creditors, but said it needed an additional $36 billion to $44 billion in financing to complete unfinished real estate projects.
In a filing on Sunday, Evergrande said it has already secured new funding for some projects and will continue to seek additional capital.
But it said the company’s ability to continue as a going concern still depended on whether it could successfully complete the external debt restructuring plan, which was proposed in March.
It added that it also needed to negotiate with other local lenders about extending the company’s loans.
Since Friday, Beijing has once again intensified its political support to support the real estate sector, which has been a major impediment to the country’s economic growth.
Five Chinese regulators — including the Ministry of Housing and Urban and Rural Development, the People’s Bank of China, and the State Tax Administration — separately Announce a series of moves To boost home buying and revive the ailing industry.
The measures include allowing local governments to overturn a rule that bars people with previous mortgages from being considered first-time homebuyers in major cities. These homebuyers generally enjoy preferential treatment in bank lending.
“This mortgage relief measure is likely to unleash higher demand in major cities,” Nomura analysts said Monday.
“We think many cities … will lift this rule, given the current risk of a nationwide real estate collapse.”
The housing and tax authorities also jointly announced Friday that they will extend personal income tax cuts to people who buy new homes within one year after selling previous properties.
Most of the Chinese real estate developers listed on the Hong Kong stock exchange appear to have received a boost from the move.
On Monday, Country Garden shares rose 8.6% in Hong Kong. Guangzhou R&F Properties rose nearly 7%. Sunak China shares rose 3.4%, and China Overseas Land shares rose 2.7%.
However, Nomura analysts said the measures announced over the past few days were not enough to “stop the decline” in China’s real estate sector.
They added that Beijing may have to take further measures, including lowering deposit rates and mortgage rates further, and providing financing to support the renovation of urban villages.