China’s ailing Evergrande makes strong gains on stock exchange

Photo: VCG

The embattled Chinese real-estate group Evergrande made gains on the Hong Kong stock exchange on Thursday despite lingering fears of defaults.

Evergrande shares ended trading up around 17 per cent at 2.66 Hong Kong dollars (0.30 US dollar), after jumping more than 30 per cent at the start.

According to observers, investors were reacting to an announcement made the day before, in which the group said it was able to gain some breathing space.

Evergrande had said on Wednesday that it had reached an agreement with creditors on interest payments on a bond traded in Shenzhen, southern China, which were due on Thursday.

The Hong Kong stock exchange was closed on Wednesday for a public holiday.

However, great uncertainty was caused by the fact that the company has still not given any details about another offshore bond traded in US dollars on which millions of dollars in interest must be paid on Thursday.

Another multimillion-dollar interest payment is due on September 29.

The Chinese group has debts equivalent to more than 300 billion dollars. Investors fear a default. The company needs to raise money to pay banks, suppliers and bondholders on time. In addition, Evergrande owes several billion dollars to small investors, including many employees.

Evergrande suffered a major setback after Chinese Estates Holdings, the company’s second largest shareholder, sold shares worth 32 million dollars. Later, the it intends to sell its remaining shares.

The head of Evergrande again tried to disperse fears in a special meeting on Wednesday evening, Chinese state media reported. Paying off customers of financial investment products was the top priority, CEO Xu Jiayin said.

He added that everything must be done to resume the construction of unfinished flats and protect the interests of owners.

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