Investors and media attention has been monopolized in recent weeks by the war in Ukraine and the commodity crisis. However, between last week and this week two international issues that seemed forgotten by the markets have come back by arrogance. On the one hand, the Federal Reserve has radically changed its monetary policy stance with effects beyond the borders of the United States. On the other hand, the real estate crisis in China is in full swing despite Beijing easing the tight regulations. Regarding the brick of the Dragon, just today Evergrande is back to talk about himself. The Shenzhen group announced in a note to the Hong Kong Stock Exchange that it will not be able to publish the financial results for 2021 by March 31, as required by the rules valid for listed companies,
Its two subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services Group also reported the delay. Evergrande justified in the note the postponement of publication on the grounds that due to the “drastic changes” in its operating environment since the second half of last year the auditor has added a large number of audit procedures this year, in addition to the “effects triggered by the spread of Covid-19 “. The results will be published “as soon as possible” once the process is completed, adding that the suspension since yesterday of the shares of the parent company and its two units listed in Hong Kong will remain in effect until the balance sheet data is notified. To understand how deeply the real estate debt crisis has affected the sector, Nomura reported that as of Monday evening nine developers, also listed in Hong Kong, including Evergrande, Ronshine and Shimao, have not given the announcement of the date of notification of the results due to the resignations of their reviewers. “When developers change their auditors ahead of the annual accounts season, this typically raises alarms of potential auditing bottlenecks and should lead to serious market problems on the reliability of the output numbers,” explained the Japanese bank. announcement of the date of notification of the results due to the resignation of their auditors. “When developers change their auditors ahead of the annual accounts season, this typically raises alarms of potential auditing bottlenecks and should lead to serious market problems on the reliability of the output numbers,” explained the Japanese bank. announcement of the date of notification of the results due to the resignation of their auditors. “When developers change their auditors ahead of the annual accounts season, this typically raises alarms of potential auditing bottlenecks and should lead to serious market problems on the reliability of the output numbers,” explained the Japanese bank.
Evergrande’s news doesn’t end there. Evergrande Property Services told the Hong Kong Stock Exchange that it found in its annual report that “relevant banks” surprisingly took control of 13.4 billion yuan ($ 2.1 billion) in the hands of the subsidiary. No details were given on the profile of the institutions in question. The unit, which deals with real estate services, said the sum claimed by the institutions consisted of bank deposits that had been offered “as security on third party collateral”, suggesting that the amount was to cover debts assumed by another borrower. The developer said it was a “serious incident” and would be reviewed by independent committees from both companies.
Times remain turbulent for the Chinese giant founded by Hui Ka Yan. The real estate developer is the most heavily indebted in the world with $ 310 billion in liabilities and more than 20 billion in offshore bonds issued and with sales in sharp decline. On the other hand, it has already defaulted on a dollar bond last December. Analysts are of the view that failing to publish the 2021 accounts in time will further deteriorate sentiment in the real estate sector, scrambled by investors in the financial markets. According to Reuters sources, Evergrande executive director Siu Shawn, non-executive director Liang Senlin and company risk management committee member Chen Yong will have a meeting today with international investors. It is likely that there will be talk of debt restructuring, a process that promises to be one of the most complex in history in the coming months also due to the “hidden” off-balance sheet debts. A problem that Xi Jinping would like to avoid in such an important year for the future of his presidency. (All rights reserved)
