Relief in global markets as Chinese real estate giant Evergrande lands debt service deal
Crisis-stricken Chinese real estate giant Evergrande has averted disaster after signing a deal on its debt repayments, sparking a wave of relief across global markets.
The world’s most indebted property developer, with debts exceeding £220 billion, sparked panic this week over fears he would be unable to pay his loans, causing chaos in China’s economy that could spread internationally .
Comparisons were made with US bank Lehman Brothers, which collapsed the markets when it collapsed in 2008.
Evergrande, which has debts of more than £220 billion, sparked panic this week over fears it would go bankrupt, causing chaos in China’s economy that could spread internationally
But Evergrande’s head of unit, Hengda, said it has agreed to a £26m repayment on a bond maturing today.
The statement, filed with the Shenzhen Stock Exchange, did not state how much or when the money would be paid, and did not mention any interest payment of £61 million on a foreign bond, also due today, or another £35 million to be paid next week. .
If payment is not made, it has 30 days before it is in default. Evergrande, which builds flats for the upper and middle class in China, scared investors in August when it warned of a possible default on its massive debts.
Since then, shares have fallen about 48 percent.
Shares of Evergrande in Frankfurt rose more than 35 percent while the Hong Kong Stock Exchange was closed for a holiday.
Markets also took heart after China’s central bank injected £14 billion into the financial system.
London Asia-focused shares rose 4.4 percent, or 15.65p, to 375.4p with HSBC, while Standard Chartered climbed 4.7 percent or 19.4p to 429.4p.
Hopes that the situation in Evergrande would not put the brakes on the Chinese real estate sector, a major consumer of raw materials, also boosted mining companies.
Antofagasta added 6.9 percent or 91.5p to 1420.5p, while Glencore rose 3.9 percent or 12.2p to 324.2p, Anglo American rose 3.6 percent or 88p to 2562p and Rio Tinto bounced 2.9 percent or 134p , to 4841p.