លំនាំដើមដោយចិន Evergrande ទំនងជាមិនបង្កឱ្យមានភាពមិនស្រួលដែលគំរាមកំហែងដល់ប្រព័ន្ធហិរញ្ញវត្ថុរបស់ប្រទេសចិន

- Comparison to collapse of Lehman Brothers ‘far-fetched’, analysts say

- Beijing not expected to take action, Evergrande hit to financial system ‘manageable’, S&P says

A highly anticipated default by China Evergrande Group as soon as this week is unlikely to spark a broader malaise that threatens the overall stability of China’s financial system in the same way the collapse of investment bank Lehman Brothers did during the global financial crisis in 2008, according to research analysts.

The world’s most indebted property developer is supposed to make a series of interest payments on its debt beginning on Thursday, but S&P Global Ratings and other credit rating agencies said a default is “likely”.

The Shenzhen-based company had some US$300 billion in liabilities at the end of the first half of this year, and concerns about a potential contagion have sent borrowing costs soaring for other property developers and sparked a sell-off in stocks from Hong Kong to New York on Monday.

“We don’t expect government actions to help Evergrande unless systemic stability is at risk. A government bailout would undermine the campaign to instil greater financial discipline in the property sector,” S&P Global Ratings analysts Matthew Chow and Christopher Yip said in a research note. “Government support to prevent a default is only likely if contagion risks cause other large developers to fail. This could threaten the stability of the financial system and economy. We think the hit to the financial system from Evergrande alone will be manageable.”

The worries about cash-strapped Evergrande’s ability to repay its massive debt load comes as Beijing has been trying to cut borrowing levels in China’s property sector and after warnings by foreign investors about rising debt levels in the mainland.

In August 2020, the People’s Bank of China, the country’s central bank, introduced its “three red lines” measures – financial requirements that limit the ability of developers to borrow – as part of efforts to take some air out of speculative bubbles that have driven up residential property prices in recent years.

Despite the headline figure, Evergrande’s liabilities, including 227 billion yuan (US$35 billion) in bank loans, is “not large enough to tip the scale”, according to Barclays. China’s banking system as a whole has as much as US$45 trillion in assets and US$30 trillion in loans, the bank said.

“Evergrande’s balance sheet doesn’t seem a good indicator of the entire real estate sector; its liabilities have grown far more rapidly than those of the entire Chinese property sector. And Evergrande’s profit margins have collapsed over many years – which is also at odds with the overall property complex,” Barclays analysts Ajay Rajadhyaksha and Jian Chang said in a research note. “We don’t believe the business model of Chinese property firms is on the whole broken; Evergrande is in worse shape than most, both in terms of leverage and its business model.”

The comparison of Evergrande to the global crisis sparked by the collapse of the US housing market and subsequent bankruptcy of Lehman 13 years ago is “far-fetched”, according to Alexandre Bon, a market risk expert at financial software provider Murex.

“We are not on the doorstep of a Chinese version of the Asian Financial Crisis, but there is a risk of major contagion from Evergrande and a credit crunch affecting financial markets through the real economy,” Bon said.

While Evergrande’s liquidity crunch and its impact on the property sector presents a potential systemic risk to China’s financial system, it is not expected to be a “Lehman moment” for China, according to Citigroup. Any dip in banking stock prices could be an “enhanced opportunity” to buy quality names in the sector, the bank said.

“Policymakers will likely uphold the bottom line of preventing systematic risk to buy time for resolving the debt risk, and push forward marginal easing for the overall credit environment,” Citigroup analyst Judy Zhang said in a research note.

SCMP

China Evergrande New Energy Vehicle, which is developing the Hengchi car brand, has granted 323.72 million share options worth HK$1.26 billion (US$162 million) to three directors and 3,000 plus employees.

The options are exercisable from March 20 next year at HK$3.90 per share, 34 per cent higher than Monday’s closing price of HK$2.90.

The electric vehicle (EV) unit of China Evergrande Group, the world’s most indebted developer, has granted share options worth HK$1.26 billion (US$162 million) to directors and employees in a bid to “promote and support” the company’s development, according to a filing on Tuesday.

A total of 323.72 million share options were granted to three independent non-executive directors and around 3,180 employees of China Evergrande New Energy Vehicle. The share options will be exercisable in four tranches starting from March 20 next year at HK$3.90 per share. That puts it at a premium of around 34 per cent to the closing price of HK$2.90 on Monday. The company’s shares have fallen by around 90 per cent year to date.

The three independent non-executive directors – Chau Shing-yim, Guo Jianwen and Xie Wu – were each given 300,000 share options. Chau is the chairman of the audit committee of the EV maker and its parent, while Guo and Xie are involved in the traditional Chinese medicine industry in the mainland.

The remaining 322.82 million share options were given to the staff, including scientific research personnel.

These share options “will help the group continuously promote and support the development of the company, ensure the interests of the group as a whole and its long-term development stability, enhance the corporate value of the company and achieve its long-term objectives,” China Evergrande New Energy Vehicle said.

The move to grant share options at this point of time can encourage and give employees confidence and a sense of stability without involving any cash flow from the company’s standpoint, said Stanley Chan, director of research at Emperor Securities.

While little clarity was provided by the company about the employees who received the share options, Chan said they were likely to be engineers and salespersons involved with the development of the company’s Hengchi-branded cars.

The EV maker has taken a big step forward by road-testing five models earlier this month, in an apparent attempt to lift some of the gloom surrounding its prospects ahead of a potential sale.

A fleet of 53 cars, comprising the Hengchi 1,3,5,6 and 7 models, recently completed a 70-day road test covering 500,000km. The tests were carried out in Turpan in China’s northwestern Xinjiang province and Qinghai in the southern island province of Hainan, according to a post on the company’s official WeChat account.

“Everyone is looking at Hengchi vehicles, which need to be rolled out as soon as possible to stabilise market confidence,” said Chan.

“In the event that they need to sell the company, at least the market valuation will be higher [with its launch],” he added, alluding to parent Evergrande’s US$300 billion of liabilities.

In a letter to employees on the occasion of the Mid Autumn Festival reported by mainland media on Tuesday, Evergrande chairman Hui Ka-yan said he firmly believed the group will be able to walk out of its darkest moment, and fulfil its responsibility to homebuyers, investors and financial institutions.