China’s Evergrande says its losses have fallen by 50% in the first half of 2023

Hong Kong

Evergrande Group, the world’s most indebted real estate developer, saw a sharp reduction in its net losses in the first half of the year, thanks to a boost in revenue due to a “brief boom in the property market” earlier this year.

Shares of most Chinese property firms fell more than 70% on Monday after they resumed trading following a 17-month suspension, after Beijing further eased asset measures.

For years, the Shenzhen company was one of China’s largest property developers by sales. But it borrowed heavily to fund its expansion and defaulted on its debt in 2021, sparking a crisis in China’s real estate sector, which accounts for up to 30% of the country’s economy. Earlier this month, it filed for bankruptcy in the US.

Investors are closely watching China’s progress as it has played a key role in the current economic crisis.

Evergrande’s loss attributable to shareholders was 33 billion yuan ($4.5 billion) in the January-June period, a 50% drop from a 66.4 billion yuan ($9.1 billion) loss in the same period a year ago. Sunday filing to the Hong Kong Stock Exchange. Revenue rose 44% from a year ago to 128.2 billion yuan ($17.6 billion).

The company said it is “aggressively planning to resume sales and has successfully captured the short boom in the property market that emerged at the beginning of the year.”

The Chinese economy enjoyed a strong start to the year, thanks to a post-opening rally after the country lifted its strict Covid-19 restrictions. But that rebound has faded since April.

According to a long-delayed financial report released last month, Evergrande is facing an $81 billion loss in 2021 and 2022.

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Its challenges are not over. Evergrande still has liabilities worth 2.39 trillion yuan ($328 billion) as of the end of June. This is slightly lower than the 2.44 trillion yuan ($334 billion) in total liabilities reported at the end of last year.

Its total assets fell to 1.74 trillion yuan ($239 billion) from 1.84 trillion yuan ($253 billion).

Evergrande is undergoing a government-led debt restructuring, which began in late 2021 shortly after it defaulted on its debt.

In March this year, it unveiled a multibillion-dollar plan to reconcile with its international creditors.

In Sunday’s filing, Evergrande said it has already secured new financing for some projects and continues to seek additional capital.

But the company’s viability remains an ongoing concern, depending on whether it can successfully complete the external debt restructuring plan proposed in March.

It also said it is in talks with other offshore lenders about extending the company’s loans.

Since Friday, Beijing has again stepped up policy support to boost the real estate sector, a major growth driver of the country’s economy.

Five Chinese regulators — the Ministry of Housing and Urban-Rural Development, the People’s Bank of China and the State Administration of Taxation — separately Announced a series of moves Boost home buying and revive a struggling industry.

The measures include allowing local governments to remove a rule that disqualifies people with previous mortgages from being considered first-time homebuyers in major cities. Such home buyers generally prefer bank lending.

“This mortgage easing move will improve demand in major cities,” Nomura analysts said on Monday.

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“Given the current risk of property collapse nationwide, we believe many cities … will eliminate the rule.”

Housing and tax authorities jointly said on Friday that the personal income tax rebate will be extended to those who buy new homes within a year of selling their previous property.

Most Chinese property developers listed on Hong Kong’s stock market seem to have taken a boost from the move.

On Monday, Country Garden rose 8.6% in Hong Kong. Guangzhou R&F properties rose nearly 7%. Sunak China rose 3.4%, while China Overseas Land rose 2.7%.

However, Nomura analysts said the measures announced over the past few days were not enough to “prevent a downward spiral” in China’s property sector.

Beijing may be forced to take additional measures, including further lowering deposit rates and mortgage rates and providing financing to rehabilitate urban villages.

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