Evergrande Crisis Now no Risk to China's Economy, According to IMF

Shares of ailing Chinese real estate group China Evergrande Group shot up Thursday. Investors in Hong Kong returned from a day off and were still processing the news that Evergrande would pay interest on some of its loans on time after all.


Fears that China’s second-largest real estate developer, which is struggling with a mountain of debt of more than 200 billion euros, would not meet its financial obligations led to steep price losses for Evergrande and unrest on the stock markets earlier this week.

Evergrande shares were up almost 20 percent in the meantime. Earlier in the day, the stock was up more than 30 percent. However, for the entire year, the stock is still about 80 percent in the negative. Chairman Hui Ka Yuan assured that paying back investors remains the company’s top priority.

However, Chinese Estates Holdings, Evergrande’s second-largest shareholder, said it has sold some of its Evergrande shares and plans to sell its entire 6.5 percent stake in the company. As a result, Chinese Estates rose 6 percent. Other real estate companies such as China Vanke, Sun Hung Kai and Country Garden also showed recovery as fears diminished that an Evergrande fall would sweep the entire sector.

The Hang Seng index in Hong Kong gained 0.7 percent, partly thanks to Evergrande’s price recovery. British bank HSBC, which is also listed in Hong Kong, climbed 2 percent. CEO Noel Quinn said he does not expect a direct impact for the bank from Evergrande’s debt problems. However, according to him, the bankruptcy of the real estate group will have an impact on the financial markets.

In Shanghai, the main indicator gained 0.4 percent. The Chinese central bank has pumped billions more into the financial system for the second day in a row to have enough money to absorb shocks. In Seoul, the Kospi fell 0.5 percent after a holiday period in South Korea. The Tokyo stock exchange was closed for a national holiday.

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