Shares of China Evergrande New Energy Vehicle Group slumped 26% after it warned it faced an uncertain future unless it got a swift injection of cash
Shares of China Evergrande’s electric car unit slumped 26% on Monday after it warned it faced an uncertain future unless it got a swift injection of cash and after it said it will not proceed with plans to issue RMB shares.
The warning by China Evergrande New Energy Vehicle Group after the market closed on Friday was the clearest sign yet that the embattled property developer’s liquidity crisis is worsening in other parts of its business.
Shares of the electric car unit dropped to HK$1.66 (US$0.21) in early trade before paring losses to drop 2.2%. China Evergrande’s stock gained 5% to steady near the decade-low they made last week, while Evergrande dollar bonds were at distressed levels.
In the broader market, concerns that a collapse at Evergrande could drive a global crisis have ebbed.
I think the markets have priced in that on the balance of probabilities, the shock and awe is over, said Kyle Rodda, analyst at brokerage IG Markets in Melbourne.
Markets are really just expecting from here on in, a company that is doomed to failure but one which won’t be allowed to result in major risks within the Chinese financial system – or that (contagion) won’t pervade global markets, Rodda said.
Evergrande missed a payment deadline on a dollar bond last week and its silence on the matter has left global investors wondering if they will have to swallow big losses when a 30-day grace period ends.
Its next major test in public debt markets will come on Sept. 29, when it is due to make a $47.5 million bond interest payment on its 9.5% March 2024 dollar bond.
With liabilities of around $305 billion, Evergrande has run short of cash and become Beijing’s biggest corporate headache, with investors worried a collapse could pose systemic risks to China’s financial system.
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