In This Article:
By Clare Jim
HONG KONG (Reuters) -China Evergrande Group shares slumped on Thursday after the developer's thinly detailed roadmap for restructuring left investors dissatisfied and its indebted peers also fell on concerns higher interest rates would raise financing costs.
Regulatory curbs on borrowing have driven China's property sector into crisis, highlighted by Evergrande, the world's most indebted property firm. The contagion has engulfed other Chinese developers, roiled global financial markets in the past year and contributed to a slump in China's property market, which accounts for a quarter of its economy.
Evergrande closed 3.4% lower at HK$1.71 ($0.2195) on Thursday, narrowing from a 9.6% loss in early trading, on investor scepticism in the developer's plan to have a preliminary restructuring proposal in place in six months.
The Hang Seng Mainland Properties Index shed 2.6%, while the benchmark Hang Seng Index dropped 2%.
The U.S. Federal Reserve said on Wednesday it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases.
"Chinese real estate companies are highly leveraged, with a lot of overseas debt, so U.S. Fed signalling large room for rate hikes will put even more pressure on their financing," said Alvin Cheung, associate director of Prudential Brokerage Ltd.
The long-awaited communication between Evergrande and creditors occurred as Beijing plans to tighten control over the property developer, while taking measures to stabilise China's property sector.
Evergrande's assets are expected to be taken over by state-owned firms in a restructuring led by the Guangdong provincial government, where Evergrande is based, Reuters has reported.
Those plans appears to be in place with Bloomberg, citing sources familiar with the matter, reporting on Thursday that the provincial government submitted a proposal to Beijing to sell most of Evergrande's assets except for its separately listed property management and electric vehicle units.
A group led by China Cinda Asset Management Co, a state-owned bad debt manager and major Evergrande creditor, would take over any unsold property assets, the Bloomberg report said.
The Guangdong provincial government did not immediately reply to a request for comment.
Evergrande set up a risk management committee last month, mostly comprising senior officials from state entities including Cinda, and earlier this week it named Liang Senlin, chairman of China Cinda (HK) Holdings Company, a unit of Cinda, as a new board member.