Asset-sale report spurs US$3.5 billion rally in China Evergrande companies as billionaire seeks to steady ship

Beleaguered developer says it is holding talks with ‘independent third party investors’ to sell assets and raise cash, according to Reuters

Companies in the group rallied by 7.3 to 20.5 per cent in Hong Kong for some of their best gains this year

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China Evergrande faces a hostile market as concerns about a liquidity crunch wipes out more than HK$308 billion of value from its member companies. Photo: Reuters

Published: 6:31pm, 10 Aug 2021Updated: 11:56am, 15 Sep 2021

Shares of companies in the China Evergrande group recorded some of their biggest rallies this year, restoring more than US$3.5 billion of market value, following a report saying the developer was preparing to sell assets to boost its liquidity.

The group was in discussions with state-owned and private companies to sell its stakes in its electric car and property management units, according to a Reuters report. It was also seeking buyers for its urban renewal projects in Shenzhen, the report said, citing people it did not identify.

The group’s board of directors later confirmed in a statement that it was in talks with “independent third party investors” about selling the two units.

China Evergrande jumped 7.3 per cent to HK$5.87 on Tuesday, the most in a week. Its subsidiary China Evergrande New Energy Vehicle rallied 8 per cent, the most this month, to HK$13.20, while Evergrande Property Services Group surged 20.5 per cent to HK$6.70 for its best day since January.

The rally added HK$27.2 billion (US$3.5 billion) to their combined market capitalisation, and comes as a relief for investors who have suffered a rapid slump in their bets this year. More than HK$308 billion has been erased from the three entities this year through Monday, as billionaire founder Hui Ka-yan faced a hostile market in his efforts to steady the ship.

Hui Ka-yan, billionaire founder and chairman of China Evergrande Group. Photo: Handout

“The move [asset sales] if realised should somewhat help ease the concern of insolvency risk for Evergrande, especially if they can introduce a big state-owned enterprise as strategic investor for the new-energy vehicle and property services units,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities.