Key Sentence:
- The fight against Chinese real estate giant Evergrande opened 6% in Hong Kong after Chinese media reported they were paying interest before an important deadline.
- Last month, the company missed an $83.5m (£61m) payment, triggering a 30-day grace period on Saturday.
The company sent the funds on Friday; a source told Reuters news agency. If the deadline is missed, Evergrande will default. Payout news showed that Evergrande’s Stock shares rebounded from the previous day’s sharp decline after a deal to sell part of its real estate unit fell through. It is reported that real estate firm China Hopson Development will buy a 51 percent stake for $2.6 billion (£1.88 billion). However, the two companies confirmed the deal was over after disagreeing on terms.
Short term correction
The recent Evergrande’s Stock payouts are unlikely to dispel investors’ long-term concerns. If Evergrande does pay interest on the bonds today, it’s still only a short-term fix. Next week is another deadline for paying the two foreign bonds worth $47.5m (£34m).
Evergrande have more than $300 billion in debt that it seems increasingly unable to pay. The company’s total liabilities account for about 2% of China’s gross domestic product. The crisis has raised fears that its potential collapse could trigger shock waves in world markets. It started last year when Beijing introduced new rules to control the large debt companies owe amid concerns about rising real estate debt.
A surprise interest payment from Evergrande on Friday boosted Chinese stocks and risk-sensitive assets, including unwanted bonds, as last-minute charges eased a period of uncertainty for investors. On Thursday, developers sent $83.5 million to pay off the interest on overseas dollar bonds ahead of a closely watched deadline that ends on Saturday, state media reported.
Evergrande shares rose 7.8 percent in Hong Kong on Friday, on track for their first surge since late September.
When the company raised $1.5 billion through the sale of a portion of its stake in the Chinese lender. The stock closed 4.2% higher on Friday. Hong Kong’s mainland Hang Seng Index rose 3.3 percent to close at 8.5 percent this week, its biggest weekly gain in a month. The broader Hang Seng Index was up 0.4%. According to Bloomberg, the Shanghai real estate index rose 4.7 percent in two days, its highest value in seven weeks.
Evergrande dollar bonds rose, with the note appreciating more than 10% on Fridays in April 2022 and 2023, the Guardian reported, citing data from Duration Finance.