Evergrande tanks; realty recovery hopes likely

Trading in shares of Hong Kong-listed China Evergrande Group, a prominent but debt-laden Chinese mainland property developer, resumed on Monday after more than 17 months, but they plummeted nearly 79 percent, losing some $2.2 billion in market value, as investors reacted negatively to the company's announcement of its first-half results on Sunday.

Although the company said on Sunday that its first-half loss has narrowed year-on-year despite the overall property market downtrend, investors seemed cautious on hopes of a rapid recovery, stock-market insiders said.

Evergrande shares closed at HK$0.35 (4 cents), down from HK$1.65 on March 18, 2022, the last trading day before the suspension took effect on March 21,2022.

In a filing to the Hong Kong Exchanges and Clearing Ltd on Friday, Evergrande said it has fulfilled all the conditions for resumption of trading in its shares from Monday.

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, said, "The supportive measures in the capital market are expected to boost investor confidence, and the varied measures to back the property sector will surely help improve the business performance of China Evergrande."

On Sunday night, Evergrande's interim financial report showed first-half revenue rose 44 percent year-on-year to 128.18 billion yuan ($17.57 billion), with about 120 billion yuan coming from the property development business.

Yet, the company posted a net loss of 39.25 billion yuan. But, compared to the loss of 86.17 billion yuan in the first half of last year, this year's first-half performance was much better. Its total liabilities fell marginally to 2.39 trillion yuan at the end of June from 2.44 trillion yuan at the end of 2022.

With China announcing a series of supportive measures for the housing market in recent weeks, experts said they expect the property sector will see a gradual recovery, potentially helping troubled developers such as Evergrande and Country Garden to reach a turnaround.

The Ministry of Housing and Urban-Rural Development, the National Financial Regulatory Administration and the People's Bank of China, the country's central bank, jointly issued a circular recently promoting the implementation of supportive mortgage policies.

"The decision to allow local governments to treat, if they so desire, people who own no homes in their regions as first-home buyers eligible for favorable mortgages, will not only lower down payments and mortgage rates for homebuyers but reduce the cost of buying a home," said Chen Wenjing, director of research at the China Index Academy.

The property market recovery will take time, which means the supportive measures would produce the hoped-for results gradually. Therefore, pressure on the realty market for a shakeout will continue, and real estate developers such as Evergrande will still be under operational pressure for a while, said Zhang Hongwei, founder of Jingjian Consulting.