Market News

UBS issued a report saying that the Hong Kong High Court yesterday (29 th) issued a liquidation order to China Evergrande (03333.HK), which applies to the Group's offshore assets, such as listed subsidiaries such as Evergrande Property (0666.HK) and Evergrande Automobile (00708.HK), but the liquidation order has limited implications for mainland assets. There is a mutual recognition agreement between Hong Kong and the Mainland courts for bankruptcy reorganization, which is applicable in some Mainland regions such as Shanghai, Shenzhen and Xiamen. Therefore, the winding-up order may involve assets of the relevant cities. The bank believes that Evergrande's liquidation order will speed up the restructuring negotiations of US dollar debt of other real estate companies. If the enterprises fail to put forward a firm restructuring plan, bondholders may lose patience and file liquidation applications. Some of the US dollar debt restructuring proposals involve debt-to-equity swaps, which will increase liquidity and lead to dilution of equity, which will have a negative impact on the share prices of these defaulting developers. More asset sales actions are expected from the mainland developers to advance the debt restructuring negotiations.