Trading of Bonds Suspended for Chinese Real Estate Giant Evergrande as Prices Plummet

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SHANGHAI, CHINA - MARCH 24: A security man removes his protective mask by the entrance of Shanghai Stock Exchange Building on March 24, 2020 in Shanghai, China. (Image: Yves Dean/Getty Images)

Once the world’s most valuable real estate company, the Evergrande Group, had trading of its bonds suspended by China’s stock exchanges on Monday Sept. 6.

The Shanghai Stock Exchange (SSE) said in a statement that the halting of trading was a temporary measure after it had discovered “abnormal fluctuations” in the price of the company’s corporate bonds. 

Data is indicating that Evergrnade’s bonds slid by more than 25 percent to a low of 40.18 yuan or US$ 6.22 on Monday afternoon following the resumption of trade. “The company’s 5.9% May 2023 Shenzhen-traded bond , which was also suspended, fell more than 35% after trading resumed.” Reuters reported. 

The halt in trading follows the China Chengxin International Credit Rating Co (CCXI) downgrading the company’s credit rating from AAA to AA on Thursday and placing the company and its bonds on a watch-list anticipating further downgrades. 

Evergrande has reportedly been scrambling to raise funds in order to pay lenders and suppliers which has spawned broader concerns that a debt crisis could be developing that could send shock-waves through China’s economy and banking system.

The company, which employs upwards of 200,000 people and claims to indirectly generate 3.8 million jobs in China, has a presence in more than 280 cities throughout China. Its bankruptcy would have devastating effects on the Chinese economy.

The Evergrande group is one of the most indebted companies in the world with a list of liabilities exceeding 1.97 trillion yuan or more than US$300 billion.

Reports have surfaced recently that at least two of Evergrande’s largest non-bank creditors have demanded immediate repayment of loans which is adding to the company’s liquidity strains. 

The company’s president, Xu Jiayin, was ranked as the fifth richest person in China in a recent wealth report from Hurn.