China Evergrande’s 30 per cent discounts get world’s most indebted developer within sight of sales goal, allay cash crunch fears

The Guangzhou-based developer sold 141.63 billion yuan of real estate in the 38 days through October 8, including China’s weeklong National Day public holidays, typically a peak spending period

That brought the year’s revenue to 592.25 billion yuan, or 91 per cent of its sales target, Evergrande said

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A visitor looking at the model of a new apartment complex developed by Evergrande Group in the Hubei provincial capital of Wuhan on November 9, 2013. Photo: Reuters

Published: 6:00pm, 9 Oct 2020Updated: 11:04pm, 9 Oct 2020

China Evergrande Group said a nationwide marketing campaign comprising 30 per cent discounts has brought it closer to hitting its ambitious full-year sales goal, as the world’s most indebted property developer pulls out all the stops to generate cash to repay debt.

The Guangzhou-based developer sold 141.63 billion yuan (US$21.1 billion) of real estate in the 38 days through October 8, including China’s weeklong National Day public holiday, typically a peak spending period. That brought the year’s contracted sales to 592.25 billion yuan, or 91 per cent of its sales target, Evergrande said in a statement.

The strong numbers are a relief for Evergrande’s shareholders, as their shares have see-sawed amid conflicting views about the company’s ability to repay 835.5 billion yuan in debt, causing the stock’s price to deviate by as much as 30 per cent from its three-month average. Two weeks ago, Evergrande’s shares plunged by 13 per cent in a day when the company found itself in the cross hairs of short sellers betting on its demise, with a fabricated document being circulated about its dire financial circumstances.

“The strong sales in September and October, if coupled with a healthy cash collection rate, will help the company generate the cash required to alleviate its tight liquidity position and address other upcoming debt obligations,” said Luther Chai, analyst with Singapore-based debt-research firm CreditSights.

China Evergrande Group’s chairman Hui Ka-yan during the developer’s 2017 financial results press conference at the Four Seasons Hotel in Central on 26 March 2018. Photo: David Wong

The success of Evergrande’s sales campaign may be the harbinger of a price war, putting the pressure on competitors to similarly slash prices to attract buyers into committing to big-ticket purchases amid the slowest economic growth pace in decades. The discounts also risk upsetting China’s property owners, who are unaccustomed to falling asset prices, owing to the dearth of investible options in the country for their life savings.

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