Chinese Estates cuts losses, heads for exit after 12 years as Evergrande’s biggest ally and second-largest shareholder
- Chinese Estates posted a loss of HK$1.38 billion after selling 108.9 million Evergrande shares for HK$246.5 million, or HK$2.26 each on average, from August 30 to September 21
- The company said it may sell its remaining stake of 751.09 million shares, or 5.66 per cent of Evergrande
Chinese Estates posted a loss of HK$1.38 billion (US$177.2 million) after selling 108.9 million Evergrande shares in the open market for HK$246.5 million, or HK$2.26 each on average from August 30 to September 21, according to a stock exchange filing. Evergrande’s shares changed hands at HK$3.42 on average during that period, according to Bloomberg's data.
Chinese Estates, then under the chairmanship of Lau’s son Lau Ming-wai, paid HK$13.59 billion to top up its Evergrande stakes in 2017 and 2018, picking up a total of 860 million Evergrande shares at an average price of HK$15.80 each, according to the filings. The average disposal price in August and this month was an 86 per cent discount to its average purchase price.
The loss from its Evergrande disposal will tally up to a HK$10.86 billion loss in the year ending December 31, the company said.
The divestment of Evergrande shares was done due to “caution and concern about liquidity,” in case “the remedial measures said to have been taken and to be taken by Evergrande could not be effectively implemented,” Chinese Estates said.
Evergrande’s shares jumped 17.6 per cent to HK$2.67, after soaring by as much as 32.2 per cent in intraday trading, on the prospect that the developer may negotiate its way out of a default. Chinese Estates rose 5.5 per cent to HK$2.30 following an intraday jump of 15.1 per cent.
The Chinese government, anxious to prevent Envergrande’s collapse from saddling Chinese homebuyers with unfinished property, may step in to restructure and nationalise the developer, asiaMarkets.com reported, citing unidentified sources close to the Chinese government.
“The news, if true, is very positive as it suggests that central government is aware of the high potential risk related to Evergrande’s bankruptcy and it needs to take immediate measures to contain all these risks,” said Raymond Cheng, head of research of Hong Kong and China at CGS-CIMB Securities. “Dragged [down] by Evergrande in the past few months, the share prices of China’s property and property management [stocks] were hit markedly. We expect the share prices in both sectors to see strong rebound in the near term.”