Evergrande halts trading ahead of 'major' deal

Shares in Evergrande have been suspended ahead of a "major transaction", the embattled Chinese property developer confirmed on Monday.

In a brief statement, the firm said trading in its Hong Kong Stock Exchange-listed shares had been halted "pending the release by the company of an announcement containing inside information about a major transaction".

Trading in the firm’s property management unit Evergrande Property Services, which was listed in Hong Kong just under a year ago, was also suspended.

No further details were provided, nor was a buyer disclosed. But mainland Chinese media suggested that rival developer Hopson Development was close to making a $5.1bn off for a 51% stake Evergrande Real Estate, according to the BBC.

Shares in Hopson, which is also listed in Hong Kong, were suspended "pending the release of announcement in relation to a major transaction of the company". It did not comment further.

Evergrande has built up debts of $305bn and is now struggling to meet bond interest payments. While it struck a deal with bondholders over a coupon payment of $35.9m earlier in September, since then it has reportedly missed due payments on two separate offshore bonds.

Fears of Evergrande’s potential collapse have rattled markets worldwide. It currently has around 1,300 projects in more than 280 Chinese cities, and last month Citi cited Evergrande when it trimmed its 2022 growth forecasts for China.

The firm has already agreed to sell part of its stake in Shengjing Bank for $1.5bn to the state-owned Shenyang Shengjing Finance Investment Group. However, the bank is one of Evergrande’s main lenders, and the money raised will be used to settle its liabilities.

Russ Mould, investment director at AJ Bell, said: "While no details were given, speculation points to rival developer Hopson preparing to buy a stake in Evergrande Property Services. One would have thought Hopson sees this is an opportunity to strike a bargain deal, given how Evergrande is in a desperate situation."

Joshua Mahony, senior market analyst at IG, said: "Overnight suspension of Evergrande shares raised fears of a debt default, yet reports that they are instead selling a 51% stake in their portfolio allayed concerns for now. The proposed $5.1bn deal would provide crucial cashflow at a time of need, yet the questions remains over whether these fire sales will be enough to stave off an eventual collapse that has been speculated as the biggest default in history."