There’s more bad news for Country Garden, the struggling developer, the latest to appear shaky amid China’s real estate crisis.
Country Garden Holdings will be removed from the Hang Seng Index, Hong Kong’s flagship index that tracks the largest companies on the Hong Kong stock exchange, which was compiled by the announced on friday.
The decision is part of the index’s quarterly review. State-owned pharmaceutical company Sinopharm, one of China’s two biggest producers of the coronavirus vaccine, will replace Country Garden.
The company’s property management arm, Country Garden Services, was also dropped from the Hang Seng China Enterprises Index, which tracks shares of mainland Chinese companies listed in Hong Kong. Travel e-commerce site Trip.com will take its place.
Both changes will take effect on September 4.
Country Garden default countdown
Losing its place in the Hang Seng Index has dealt a heavy blow to Country Garden’s reputation.
With $64 billion in revenue last year, the company was once one of China’s largest developers.The developer joined 2017 Hang Seng IndexIt’s just over a decade since the company’s $1.7 billion IPO.
Country Garden is on the countdown to its first default after failing to pay $22.5m in interest on one of its offshore bonds on Aug. 7. The developer now has 30 days to repay the debt before it is officially considered in default. By default.
The developer is currently struggling to find a way to raise enough cash to pay down debt.
According to Chinese news media reports, Country Garden is asking for an extension of payment on bonds due on Sept. 2 totaling more than $535 million. South China Morning Post. Bondholders are required to pay about $14,000 upfront, with the remaining amount to be paid in seven installments over three years.
Reports say not all bondholders are happy with some demanding full repayment on time Bloomberg. Country Garden will ask bondholders this week to vote on a delayed payment plan and an application for full repayment.
The collapse of Country Garden could be more serious than that of Evergrande, which filed for Chapter 15 bankruptcy protection in New York on Thursday. Country Garden has four times as many projects under construction as Evergrande, whose default in December 2021 sparked China’s property crisis.
Country Garden has already warned The net loss in the first half of the year was as high as 7.6 billion U.S. dollars pause Some of its yuan-denominated bonds were suspended from trading.
Country Garden did not immediately respond wealth’A request for comment was sent to investor relations.
What happened to Country Garden’s stock?
Country Garden, now Hong Kong’s penny stock equivalent, has been trading below HK$1 ($0.13) for a week. Shares have fallen more than 70% since the start of the year.
When the stock price was at its highest in January 2018, Country Garden’s market value exceeded US$60 billion. It has now fallen to just $2.6 billion.
Shares of Country Garden Services closed at $0.91 on Monday, down more than 60% from the beginning of the year.
How bad is China’s economy?
China’s housing crisis is partly responsible for the country’s slow economic recovery.
The housing sector accounts for about a quarter of the country’s GDP, and falling house prices are weighing on consumer confidence.
Economists also worry that problems in the real estate sector could spill over to China’s financial system, including the financial system. $3 trillion shadow banking sector.
On Monday, the People’s Bank of China cut The prime one-year lending rate, which supports most loans to households and businesses, fell 10 basis points, less than economists had expected.
The central bank left its prime five-year loan rate linked to mortgages unchanged, signaling its reluctance to provide more support to the housing market for now.
The Hang Seng Index fell 1.8% on Monday after a smaller-than-expected rate cut. The Hang Seng has lost 12.4% this year after a slight gain as China eased coronavirus controls.
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