Shares of China Evergrande’s units experienced a day of volatile trading after the Chinese property giant was instructed to hand over its assets to liquidators.
Evergrande Property Services’ shares initially rose by as much as 10% during early Hong Kong trade on Tuesday, but eventually ended the morning session down 1.3%. Meanwhile, China Evergrande New Energy Vehicle Group shares went from a loss of 13% to a gain of 14% before finishing the morning 4.8% higher.
Trading for both China Evergrande units resumed on Tuesday after being temporarily halted due to its parent company’s court proceedings the previous day. However, trade in China Evergrande shares remains suspended for a second day.
Although the companies’ shares have declined by 83%-93% over the past year, investors are worried that their value could decrease further as China Evergrande may need to sell its offshore assets and listed subsidiaries.
Investors are closely following China Evergrande’s liquidation plan. Sonija Li, Maybank’s head of retail research, commented, “Facing such significant uncertainty, some stakeholders may choose to sell.”
Li added that certain speculators may be betting on the smooth progress of China Evergrande’s liquidation process, which could account for the support seen in China Evergrande New Energy Vehicle’s shares.
However, if China Evergrande sells its units and prioritizes delivering homes to existing buyers, Shujin Chen, Jefferies’ head of China financial and property research, warns that “other creditors will barely have anything to recover.”
Retrieved from: The Wall Street Journal
