Tuesday, October 26, 2021

Ping An shares tumble over China Evergrande contagion fears

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Updates from Ping An Insurance Group Co of China Ltd

Shares in Ping An Insurance fell on Friday as concerns mounted about contagion from a crisis surrounding real estate developer China Evergrande, forcing the country’s largest insurer to issue a statement saying it had no exposure to the real estate group. .

Ping An shares closed down 3 percent in Hong Kong, and prices fell more than 8 percent as trading volumes rose.

The drop in prices came as concerns mounted that a liquidity crisis in Evergrande, the world’s most indebted real estate developer with nearly Rmb2tn of liabilities, could affect China’s real estate and financial system.

This week, retail investors in wealth management products related to Evergrande flocked to its Shenzhen headquarters to demand their money back, in the most visible sign yet of the deterioration of the situation. Last month, the property developer warned of the risk of default if it failed to raise more cash.

“For real estate companies that the market has been paying attention to, AP’s insurance funds have zero exposure, no equities and no debt, including China Evergrande,” Ping An said in a statement as he was quick to reassure investors. .

Ping An has Rmb63.1bn ($ 9.8bn) of exposure to Chinese real estate stocks through its Rmb3.8tn ($ 590bn) of insurance funds, and took a hit of $ 3.2bn in the first half of the year after default from another developer, China Fortune Land Development.

The insurer heads the creditors committee of China Fortune Land, which specializes in industrial parks in Hebei province and suffered from late payments from the local government. One of its restructuring advisers, Admiralty Harbor Capital, was hired by Evergrande this week.

Evergrande’s U.S. dollar bonds maturing next year are trading at 31 cents on the dollar, and its share price has plunged 82% this year as questions about its ability to pay off its debt pile of 89,000 million dollars. The dive has erased tens of billions of dollars of the wealth of its founder, Hui Ka Yan, who was once the richest man in China.

“I hope that many financial institutions will be affected by the concerns” about Evergrande, said Zhou Chuanyi, an analyst at Lucror Analytics based in Singapore. “As long as a financial institution has exposure to developers, Evergrande should take a pretty significant part of that.”

A frenzied sell-off around Evergrande’s debt and equity has shown signs of spilling over to other developers, including Guangzhou R&F and Fantasia Group. Fitch on Thursday downgraded Fantasia’s credit rating to B, warning of “uncertainty about refinancing a significant number of US dollar bond maturities through 2022 in light of ongoing capital market volatility.”

Beijing has sought for the past year to crack down on excessive leverage in its vast real estate sector, which accounts for more than a quarter of the economy. In August, he issued a rare public rebuke about Evergrande’s need to reduce its debts.

Evergrande is rushing to sell assets as it grapples with slowing apartment sales, which is largely dependent on clients buying upfront, and the need to keep payments to its suppliers and creditors on its hundreds of development projects.

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