China Evergrande shares experienced a sharp decline on Monday as trading resumed on the Hong Kong Exchange after more than a year. The stock fell by as much as 87%, reaching 0.220 Hong Kong dollars (3 U.S. cents). This drop marks the largest decline since the company’s listing in Hong Kong back in 2009.
To comply with the Hong Kong Exchange’s listing obligations, which involved publishing financial reports, Evergrande fulfilled its requirements. However, this did not prevent the significant decrease in share price.
Evergrande announced on Sunday that it had incurred losses of CNY33.01 billion for the first six months of the year. Despite this loss narrowing and revenue increasing by nearly 44.0% to CNY128.18 million, the market sentiment towards the real estate sector remains pessimistic. Weak property sales and eroding consumer confidence continue to plague the industry.
The company’s cash-flow problems have led to debt defaults and an inability to fulfill contractual obligations, such as payments to contractors and suppliers. Evergrande’s total liabilities stood at CNY2.39 trillion as of June, prompting the company to prioritize the restructuring of offshore debts and safeguard the long-term interests of its various creditors.
This decline reflects the challenging situation faced by Evergrande and the broader real estate market in China.