Global crash warning: Evergrande shares collapse – forced to sell stake in company

Australia could become ‘indebted to China’ says host

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Evergrande is expecting to raise $273m (£200m) from the sale as it grapples with a total $300bn (£222.12bn) debt. Described by some as the Chinese version of Netflix, HangTen Networks shares soared over 23 percent on the news. Meanwhile, Evergrande’s shares dropped around 2.5 percent. Evergrande started the year with a majority stake in HangTen but has been selling off shares over the year in a bid to raise money for its debt repayments.

Since September Evergrande has been missing payment deadlines for interest on its debt bonds triggering 30 day grace periods which it has reportedly narrowly made each time.

However, one company, DMSA Deutsche Markt Screening Agentur, has claimed it has not been paid since the deadline for a payment owed to it on the 10th November.

DMSA Senior Analyst Dr Marco Metzler told they had been in talks with two others who had not received payment over filing bankruptcy proceedings against Evergrande.

He also claimed another company, Shanghai Quanzhu Holdings Group Co, was filing litigation against Evergrande over payments for construction contracts.

It’s been widely feared a default and collapse by Evergrande could cause major shockwaves both within China and throughout global markets.

US central bank the Federal Reserve has warned about the strain problems in China could put on global economic growth while a report from investment bank UBS suggested a major Chinese property climb could wipe $1tr (£740bn) to global growth.

In a further blow to the Chinese property industry another company, Country Garden Services, is also following suit in selling off assets to raise cash.

Country Garden is selling 150 million of its own shares at a 10 percent discount which it hopes will raise just over $1bn (£740m)

Property has been a major cornerstone of China’s growth over recent decades and it now represents a disproportionate share of the country’s GDP at around 29 percent.

However, it has struggled considerably recently due to debt problems exacerbated by greater government red tape.

A report published today by rating agency S&P Global has highlighted the role of restrictive policies by Beijing for the state of its struggling property industry.

S&P Global Ratings credit analyst Matthew Chow said: “This downturn is unlike previous corrections as it has already contributed to a number of developer defaults.”

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“Government tightening measures are driving the downturn.

“Some developers’ inadequate liquidity management and their reliance on hidden debt have compounded market strains, but investors will likely be focused on when easing may happen.”

Another S&P analyst Esther Liu added they expected defaults for Chinese developers to “increase over the next six to 12 months” based on their recent ratings.

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