Angry investors stormed the company’s headquarters a few weeks ago and asked for their money back.
(Photo: Reuters)
Shanghai The Chinese central bank has signaled aid for the struggling real estate company Evergrande. The People’s Bank of China (PBOC) promised to protect the rights and interests of private individuals who are invested in the real estate market.
The central bank did not comment specifically on Evergrande’s debt problems, but investors were still relieved. The battered Evergrande shares rose by a good eight percent in Hong Kong. Titles from other real estate groups were also in demand.
The PBOC also stated on its website on Monday evening that it would make its monetary policy “flexible, targeted and appropriate” and ensure more stable credit growth and adequate liquidity in the market. In addition, the central bank pumped billions more into the money market. Investors have been waiting for a comment from the government or the central bank for days.
The provincial government of the city of Shenzhen wants to examine the wealth management division Evergrande Wealth. In a letter to investors that the Reuters news agency was able to view, the Shenzhen financial regulator said it would conduct a thorough investigation into the company’s debt problems. She also called on Evergrande to seek repayments to investors. Neither Evergrande nor the Shenzhen government commented on this.
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Evergrande, like other highly indebted conglomerates, has sold high-yield investment products to investors, thereby raising money for borrowing by circumventing government regulations. In total, the group has piled up debts of more than 300 billion dollars in recent years and has defaulted on creditors. Investors fear a possible collapse of the second largest Chinese real estate developer negative effects on other industries.
Financial consequences for customers and local provinces cannot be ruled out
Last week, Evergrande let a deadline for bond interest expire without comment. Another $ 47.5 million is due on Wednesday.
Analysts meanwhile firmly assume that the government in Beijing will try to avoid a financial crisis like the one after the bankruptcy of the US bank Lehman Brothers in 2009.
“We assume that the impact on the banking system will be manageable and that the government will instead focus on the social consequences of unfinished housing,” said Sheldon Chan, head of Asia bond strategy at brokerage firm T. Rowe Price.
Around 200,000 people work for Evergrande, and the company hires several million workers for construction projects every year. Angry investors stormed the company’s headquarters a few weeks ago and asked for their money back.
The president of the Asian Development Bank (ADB), Masatsugu Asakawa, said China had sufficient monetary policy options to support the financial system and avoid domino effects. “I don’t think the troubles of a single company will create a global crisis like the one caused by the collapse of Lehman Brothers,” Asakawa said. Financial consequences for Evergrande customers and the budgetary situation in local Chinese provinces cannot be ruled out.
In order to find out which banks could be affected to what extent by a possible Evergrande collapse, the central bank in Hong Kong requires information from the credit institutions, as Bloomberg reported, citing insiders. You would have 24 hours to report back to the supervisory authority. As data from the research firm Morningstar showed, Evergrande’s bondholders include BlackRock, the Royal Bank of Canada, the Swiss bank UBS Group and the London asset manager Ashmore.
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