- The developer's debt exceeds €260 billion, 2% of China's GDP.
- Its collapse is already affecting metal prices and could impact the banking sector, as happened in 2008 with the bankruptcy of Lehman Brothers.
The collapse of Chinese real estate giant Evergrande on the Hong Kong stock exchange—whereit has lost almost 11%—threatens to cause a butterfly effect on global markets, which are experiencing a Monday of uncertainty and losses.The Ibex 35 has fallen 1.2% and lost the 8,700-point mark.
Evergrande hits itslowest share price in eleven years amid growing fears that the company will go bankrupt after failing to meet its financial obligations.
The company's shares fell to HK$2.28, down from HK$2.54 at Friday's close. This isthe lowest figurerecorded since May 2010. Since its historic highs in October 2017, the company's market valuation has plummeted 92.77%. In the last 12 months alone, the declinehas been more than 88%.
At present,the brick giant's debtamounts to 1.97 trillion yuan(€260.154 billion),equivalent to approximately 2% of China's gross domestic product (GDP). Of this, 19 billion yuan is in bonds on the offshore market (foreign investors), including large Western funds.
At the close of trading on Monday, following continuous stock market crashes, its valuation stands at just HK$30.2 billion (€3.31 billion).
In its latest official statement on September 14, the company warned investors that it expects a "continuous" and "significant" drop in sales in September. Evergrande stated that the ninth month of the year is usually the best for real estate companies in China, but that recent reports in the press "have reduced the confidence of potential real estate buyers in the group."
According to data collected by Bloomberg, on Thursday the company will have to make a coupon payment on a five-year bond worth $83.5 million (€71.3 million). By the end of the year, the company will have to make interest payments totaling $669 million (€571.3 million).
Cascade effect?
Although experts consider it premature to point to acontagion effect,they do not hesitate to point out that the collapse of a giant like Evergrande will have an impact onbanksdue to their mortgage exposure, in a case reminiscent of Lehman Brothers in 2008.
Its effects on themetalssector may also be significant, as these metals are used as raw materials in construction. As a result, there have already been declines in the prices of steel, copper, aluminum, and copper.
Another knock-on effect could be a loss of investor confidence in the entire real estate sector and in the Asian offshore market.
Via Niusdiario.es
