Could Evergrande have a big market impact?
Message:
1. Question for the Week: If the Evergrande scenario escalates do you see it having a material impact on the market?
Thanks
Hylton S
The Latest Q&A
Answer
Hi Hylton,
China Evergrande is an investment company which operates in the development, investment and management of real estate and the last 12-months have been awful for the company with many questioning if its too big to fail. The Hong Kong based developer is sinking under a mountain of $US313bn in debt and the share price suggests its indeed close to collapse. UBS put a note out on Thursday saying that the Group’s total liability size is ~6.5% of the total liability of the Chinese property sector. In terms of total offshore bonds outstanding, Evergrande has ~$19bn, which is equivalent to roughly 9% of the total offshore bond market and 12% of the total high yield offshore bond market – in other words, yes, it’s a big deal and could have wider implications. That said, our opinion is if it did fail and created panic shock waves across equity markets it would be another great buying opportunity.
