China Evergrande crashes 87% to become a penny stock as the former $50 billion real estate giant reveals more steep losses

China property Evergrande

China’s property sector is central to its economy.Getty Images

  • Shares of China Evergrande crashed 87% as trading resumed after a 17-month halt.

  • The once-$50 billion property developer faces a massive debt load and a troubled balance sheet.

  • On Monday it became a penny stock after reporting a loss of 33 billion yuan in the six months ending June 30.

Shares of China Evergrande Group tumbled as much as 87%, diving into penny stock territory after trading in the shares resumed on Monday for the first time in 17 months.

By midday in Hong Kong the stock hovered around 0.35 Hong Kong dollars, with the real estate developer’s market value falling to about $586 million. Per Bloomberg, Evergrande was worth more than $50 billion in 2017.

The stock was last available for trading on March 18, 2022, and since its peak, it has lost 99% of its market cap. Trading resumed after the company said internal control systems met the Hong Kong exchange’s listing rules.

The sell-off followed a company filing on Sunday that showed a loss of 33 billion yuan for the six months up to June 30, according to the report, piling on to the 582 billion yuan losses from the last two years.

In total, Evergrande’s net losses for the first half of 2023 hit 39.3 billion yuan.

China’s economic troubles continue to mount, and much of the concern stems from the property sector, where developers like Evergrande, Country Garden, and others face risks of mounting debt and bankruptcy.

Some commentators have cautioned that a cascading “Lehman moment” looms, though economists told Insider the situation in China isn’t entirely comparable to that of the US in 2008, given the way the political economy is set up.

Still, that doesn’t mean there aren’t risks of catastrophe.

“If we think about the 2008 collapse in the US property market, driven by excessive wealth plowed into real estate, versus what’s happening in China with much higher amounts of wealth in that sector, the scale and severity of the crisis is potentially much much worse than what happened 15 years ago in the US,” William Hurst, deputy director for the Centre for Geopolitics at the University of Cambridge, told Insider in a recent interview.

Read the original article on Business Insider

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