Global Financial Crash: Evergrande To Be Removed From Stock Index As Collapse Looms | City & Business | Finance
With the real estate company facing $ 305 billion (£ 221 billion) in debt, Evergrande is expected to be removed from the Hang Seng China Enterprises Index. The index includes the top 50 eligible stocks based on a measure of their listed value in Mainland China and Hong Kong. Despite the publication of its quarterly review, the index did not give a reason for the withdrawal of China Evergrande.
Over the past five years, the company’s share price has fallen 48.04%.
This year alone, Evergrande’s share price has fallen 83.27% to HK $ 13.84.
In an attempt to repay its vast debt, Evergrande sold its stake in streaming company Hang Ten.
However, that is only expected to generate £ 200million in sales from what is labeled as the Chinese version of Netflix.
The company also attempted to sell its Hong Kong headquarters in order to help cover the debt.
Dr Marco Metzler, senior analyst for Deutsche Marktscreening Agentur, also claimed that the collapse of the company could trigger a financial crisis.
In an article on his Linkedin page, Dr Metzler said: “Panic in China!
“Real estate developers Evergrande and Kaisa are facing massive protests from homebuyers, retail investors and even their own employees! “
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The real estate market is critical to China’s GDP and is valued at $ 55 trillion (£ 40 trillion), four times the country’s GDP.
Including construction and property-related goods and services, annual housing activity accounts for 29 percent of the country’s GDP.
However, if the company were to collapse, there are fears it could trigger a global crash.
Because of its size, if Evergrande does not repay its lenders, it could scare banks around the world who might fear that other organizations will not be able to repay their loans.
Such is the size of the economy in the Chinese market, some experts have compared its possible collapse to what happened to the Lehman brothers in 2008.