Evergrande share price: China stock market crisis, group’s £220 billion debt and FTSE impact explained

Evergrande owns one of China’s biggest football clubs, Guangzhou FC, and is currently building a new stadium for its team

Major Chinese property developer Evergrande is facing an uncertain future.

The company is reportedly struggling to make interest payments to the tune of $84 million (£61m) on more than $300 billion (£219bn) of debts.

New rules brought in by Beijing regulators to limit the amount owned by big real estate developers has plunged Evergrande into a cash crisis.

The property group has been forced to offload some of its assets at major discounts to maintain a steady cash flow into the company - and keeping it afloat.

It’s struggle has seen a significant drop in share price and knock on effects on the Chinese economy, as well as other markets around the world.

And, following a 17 day suspension on trading, Evergrande shares dropped by 14% on Thursday 21 October 2021. It had halted trading ahead of a big announcement, which is yet to be revealed.

Here’s all you need to know about Evergrande and its current plight.

Who is Evergrande?

Evergrande, formerly known as the Hengda Group, was founded in 1996 by businessman Hui Ka Yan and has become an established property company.

Based in Guangzhou, in southern China, Evergrande owns 1,300 projects in more than 280 cities across China, with the wider group’s interests expanding beyond real estate.

It owns one of China’s biggest football clubs, Guangzhou FC, and is currently building a new stadium for its team - in one of many other business interests.

Evergrande employs more than 120,000 people and also makes electric cars, is involved in food and drink manufacturing, and has an interest in wealth management.

Mr Hui’s personal fortune is around $10.6bn (£7.8bn), while the Evergrande Group is the 122nd largest group in the world by revenue in 2021, according to Forbes.

What is the Evergrande share price?

Evergrande’s financial woes have been reflected in its share price since the start of the year.

It enjoyed record highs in 2017 and maintained these numbers until February 2021 when the significant drop in share price began.

Over the last six months, Evergrande’s share price has plummeted 84.91%.

Each Evergrande share is valued at 2.27 HKD (Hong Kong Dollar), which is around £0.21, at the time of writing - 11.45am on Tuesday 21 September.

What impact has this had on China’s economy?

As China’s second largest property developer, any Evergrande collapse would have a big impact on the Chinese economy.

Not only would this be reflected in its share price but also in the pockets and bank accounts of millions of people and businesses worldwide.

Many people have bought property from Evergrande before the building work has even begun, such was the company’s desperation to raise funds.

Deposits could be lost if the company goes bust while promises in the supply chain would also be lost, and could have serious consequences for those firms.

Evergrande reportedly owes money to "around 171 domestic banks and 121 other financial firms" the Economist Intelligence Unit’s (EIU) Mattie Bekink told the BBC.

Could Evergrande’s down turn be felt across the world?

The financial troubles of Evergrande are already being felt across the world in different stock markets from the US to the UK.

Japan’s Nikkei 225 is 2.17% down at closing while the impact saw the Dow Jones index in the US finish the day’s trading 1.8% down.

There were similar falls in Germany and France but Hong Kong’s Hang Seng index recovered from earlier losses to end up 0.5%.

The FTSE 100 is currently 1.17% up (21 September).

Whatever happens to Evergrande is sure to be felt in China and, as the world’s second largest economy, further afield.

China has become a powerhouse in production, with many goods and parts required to make goods, coming from companies in the country.

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