Shares of China Evergrande Group plummeted as much as 87%, diving into penny stock territory after trading in the shares resumed earlier this week for the first time in 17 months.
Evergrande was worth more than $50 billion in 2017, and now the real estate developer's market value has fallen to about $586 million. Evergrande defaulted in 2021 and filed for Chapter 15 bankruptcy protection. The last time its stock was available for trading was on March 18, 2022, and since its peak, it has lost 99% of its market cap. Trading resumed after the company said internal control systems met the Hong Kong exchange's listing rules.
The sell-off followed a company filing on Sunday that showed a loss of 33 billion yuan for the six months up to June 30, according to the report, piling on to the 582 billion yuan losses from the last two years. In total, Evergrande's net losses for the first half of 2023 hit 39.3 billion yuan.
China's economic troubles continue escalating, and much of the woes stem from the property sector, where developers like Evergrande, Country Garden, and others face mounting debt and bankruptcy risks. Country Garden’s liabilities total 1.4tn yuan (£151.1bn), about 60% the size of Evergrande’s. New home sales for the top 100 property developers declined by 33% in July, compared with 2022, according to S&P Global Ratings, a ratings agency. Country Garden’s sales were down by 60%.
Some commentators have cautioned that a cascading "Lehman moment" looms in China. "If we think about the 2008 collapse in the US property market, driven by excessive wealth plowed into real estate, versus what's happening in China with much higher amounts of wealth in that sector, the scale and severity of the crisis is potentially much worse than what happened 15 years ago in the US," William Hurst, deputy director for the Centre for Geopolitics at the University of Cambridge, told Business Insider in a recent interview.