China Evergrande electric car unit shares drop 26% after warning

The company logo can be seen at the headquarters of the China Evergrande Group in Shenzhen, Guangdong Province, China on September 26, 2021. REUTERS / Aly Song

HONG KONG, Sept. 27 (Reuters) – Shares of China Evergrande’s electric car unit (0708.HK) fell 26% on Monday after warning it faced an uncertain future unless it receives a rapid injection of cash and after announcing it will not issue shares in RMB.

The warning from China Evergrande New Energy Vehicle Group after the market closed on Friday was the clearest sign to date that the beleaguered property developer’s liquidity crunch (3333.HK) is worsening in other parts of its business .

Shares of the electric car unit slipped as low as HK $ 1.66 in early trading before cutting losses by 2.2%. China Evergrande shares rose 5% to stabilize near a decade-long low they hit last week, while Evergrande dollar bonds were at struggling levels.

In the wider market, fears that a collapse of Evergrande could cause a global crisis have faded.

“I think the markets have assessed this on a balance of probabilities, the shock and fear is over,” said Kyle Rodda, analyst at broker IG Markets in Melbourne.

“The markets are only really waiting from now on for a doomed business that will not be allowed to pose major risks in China’s financial system – or that (contagion) will not spread through world markets. “

Evergrande missed a payment deadline on a dollar bond last week, and its silence on the matter has left global investors wondering if they will have to take significant losses at the end of a 30-day grace period. Read more

His next major test in the public debt markets will take place on September 29, when he is due to make a bond interest payment of $ 47.5 million on his 9.5% dollar bond from March 2024.

With liabilities of around $ 305 billion, Evergrande ran out of cash and quickly became Beijing’s biggest business headache as investors feared a collapse could pose systemic risks to China’s financial system.

The stricken developer scrambles to raise funds to pay its many lenders and suppliers, as it oscillates between a messy collapse with far-reaching impacts, a managed collapse, or the less likely prospect of a Beijing bailout. Read more

Report by Anne Marie Roantree in HONG KONG; Additional reporting by Tom Westbrook in SINGAPORE; Editing by Muralikumar Anantharaman and Stephen Coates

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