Evergrande’s troubles are reverberating across China’s property sector.Credit:Bloomberg
The sale illustrates how authorities are taking steps to minimise fallout to the banking system from the worsening liquidity crisis at Evergrande as they try to avoid a bailout. At least 10 banks told investors earlier this month that they have sufficient collateral for loans to the developer and that risks are under control. Hong Kong’s central bank asked lenders to report their exposure to Evergrande Group,according to people familiar with the matter.
“Maintaining social and financial sector stability is still the overarching policy objective of the Chinese government,” said Nicholas Zhu,a senior analyst at Moody’s Investors Service. “Authorities,including local governments,will take policy measures and assume coordination roles to ensure that the resolution of Evergrande does not cause social or financial instability.”
In a sign of investor nervousness toward the banking industry,Dongguan Rural Commercial Bank plunged on its debut in Hong Kong. The lender listed its exposure to the real estate sector as a risk factor in a preliminary prospectus,saying the industry accounted for 8.8 per cent of its commercial loans as of March 31.
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Evergrande will sell about 1.75 billion non-publicly traded domestic shares in Shengjing Bank to Shenyang Shengjing Finance Investment Group Co at 5.7 yuan apiece,according to the statement. The developer’s stake in the lender will drop to 14.57 per cent after the latest transaction,which requires relevant approvals. Evergrande raised about 1 billion yuan from a previous stake sale of Shengjing Bank in August.
The transaction underscores the mounting pressure on billionaire Hui Ka Yan to spin off and sell assets to pay down a mountain of debt. Evergrande’s original 36 per cent stake in Shengjing Bank was among its most valuable financial assets,worth about $US2.8 billion. That holding became less appealing as regulators toughened oversight on dealings such as preferential lending and bond purchases between banks and their largest shareholders.
Evergrande shares climbed 10 per cent in Hong Kong on Wednesday morning,paring their year-to-date decline to 80 per cent. Its dollar bond due 2022 was indicated down a touch at 25.3 cents on the dollar while its 2025 note is unchanged at 23.5 cents,according to Bloomberg-compiled prices.