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The market is nervous about Evergrande defaulting,given the size of its debts,but so far,the impact has been minimal.Credit:Bloomberg

“Trading in the shares of China Evergrande Group will be halted,” the company told the Hong Kong stock exchange on Monday,without adding further details.

“Accordingly,all structured products relating to the Company will also be halted from trading at the same time.”

Chinese state-affiliated media network Cailian Press reported on Monday morning that rival developer,Hopson Development Holdings,was set to acquire a majority share in the company.

The company is 70 per cent owned by the billionaire family of Chu Mang Yee and is also based in Guangdong,but it has a debt-to-equity ratio that is a fraction of Evergrande’s. Hopson’s shares also went into a trading halt and its bonds plunged on Monday after the company declined to comment on market rumours published by Cailian.

Hong Kong’s Hang Seng dropped by 2 per cent on the news,but the majority stake could mark the start of a restructure of Evergrande that will avoid the wider economic contagion feared by Chinese authorities.

The company has failed to meet payments for two offshore bonds in the past two weeks and is now edging closer to the 30-day default deadline. The companies debts are worth 2 per cent of China’s gross domestic product.

Chinese officials have been preparing local authorities and property developers to take over uncompleted projects. They have also loosened credit restrictions for homebuyers to prop up the property sector and injecting more than $90 billion into the financial system.

Evergrande has investments across a dozen sectors including property,sport and entertainment.

The company rode the economic wave of the Chinese middle class in the 1990s and 2000s. Its decline was triggered by Chinese regulators imposing a “three red-lines” policy in August last year that prevented developers from taking on more debt to services their loans if they had a debt-to-asset ratio of more than 100 per cent.

There are nearly 800 unfinished Evergrande projects in more than 200 cities across China.Credit:Getty

The policy is part of a suite of corporate crackdowns imposed by President Xi Jinping over the past two years.

Swissquote senior analyst Ipek Ozkardeskaya said expectations of a restructure and a transition managed by the Chinese government had tempered market fears of risks to the global economy.

The Evergrande turmoil had limited impact on overseas markets on Monday. The ASX finished 1.3 per cent up while US futures were down by 0.3 per cent.

“Though the Evergrande crisis is not over in China,global investors no longer see the Evergrande waves hitting the international markets,” she said.

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