2023-08-12 15:07:42
This week, real estate-related companies on the Paris Stock Exchange were dragged down by China. Investors who have been worried for several months regarding the strength of the economy now fear the consequences of the real estate crisis. “Chinese local authorities are highly indebted and (…) the real estate crisis is causing their debt-to-income ratio to skyrocket,” explains Ipek Ozkardeskaya, an analyst at Swissquote Bank, which reports more than China’s largest real estate developer, Country Garden , might post a huge loss in its next half-year results. Some investor fears are weighing on its available cash.
Since the start of the year, its stock has fallen 63%, for a market capitalization reduced to 27 billion HK dollars, once morest more than 365 billion at its highest in 2018.
Evergrande also in trouble
In July, the Chinese real estate giant Evergrande, on the verge of bankruptcy, reported a net loss of 100 billion euros over the years 2021 and 2022, and liabilities of more than 300 billion euros. euros, on the occasion of the publication of its results which has been delayed for a long time.
The company suffered a net loss of 686.22 billion yuan (85.2 billion euros) in 2021, followed by a net loss of 125.81 billion yuan in 2022 (15.6 billion euros) , according to documents filed with the Hong Kong Stock Exchange.
These losses show “the existence of material uncertainties which may cast significant doubt on the group’s ability to continue its activity”, Evergrande said in a stock exchange document.
The former number one in real estate in China is strangled by an abysmal debt which had been estimated in 2021 at more than 300 billion dollars, following in particular the measures taken by Beijing to limit the excessive indebtedness of the sector, as well as unbridled consumer speculation.
Since then, the financial health of Evergrande has worried the markets, because the collapse in China of a group, which once claimed 200,000 employees, would have disastrous consequences for the economy.
Real estate is a pillar sector for Chinese growth. It accounts for more than a quarter of China’s gross domestic product and supports an army of low-skilled workers.
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