Evergrande shareholder exodus quickens as EV unit drops 27%

Hong Kong

CHINA Evergrande Group sank to an almost six-year low and its electric-vehicle (EV) unit lost more than a quarter of its value amid mounting concern that shareholders will bear the brunt of the developer's liquidity crisis.

Shares of Evergrande slid 12 per cent on Monday in Hong Kong to close at the lowest since September 2015. China Evergrande New Energy Vehicle Group tumbled 27 per cent, the most since October 2015. The group's property services unit dropped 9 per cent.

Shenzhen-based Evergrande is selling assets including stakes in units to avoid a cash crunch following a regulatory crackdown on leverage in the property industry.

Its shares and bonds have tumbled in recent weeks as investors question whether the company can cope with its US$300 billion in liabilities without external support.

Shareholders were dealt a blow on Monday following a report that Evergrande may sell its Hong Kong headquarters building at a loss. The developer plans to sell the office tower to Yuexiu Property for HK$10.5 billion (S$1.8 billion), less than the HK$15.6 billion it sought, Sing Tao Daily reported, citing unidentified sources. Evergrande acquired the building for HK$12.5 billion in 2015.

"Evergrande's planned liquidity injection via asset sales could face challenges as potential buyers may negotiate lower prices," Bloomberg Intelligence analyst Lisa Zhou wrote.

The bond market reacted more positively to the news of the building sale plans, which could help Evergrande meet upcoming debt repayments.

Its note due 2022 climbed 0.6 US cent on the dollar to 49.2 cents, Bloomberg-compiled prices show.

Chinese financial regulators last week issued a rare public rebuke of Evergrande, urging it to address its debt woes and refrain from spreading "untrue" information. The company said it will do its best to resolve debt risks and keep stability in housing and financial markets. BLOOMBERG