It's not just Evergrande that is about to keel over. Overnight, one of its smaller peers, Shanghai-based Sinic Holdings Group which focuses on the development of residential and commercial properties in China, was halted trading after it shares cratered in a freak 87% plunge on Monday afternoon. The plunge slashed the market value to just under $230 million, which is laughable for a listed developer in the city.
There was no reason for the selloff - an officer at the firm’s Hong Kong office said there’s no one to attend to media inquires which is probably not a good sign - which was attributed to the general panic resulting from Evergrande's imminent default, nor did the company give a reason for the trading halt in Hong Kong.
One thing was clear: selling volumes were off the chart, and as Bloomberg observes, the sudden selloff in the last two hours leading up to the suspension was accompanied by a surge in trading volume that was about 14 times its average in the past year. The liquidation may have been a margin call on a core shareholder who was forced to hit any bid, but we probably won't know for a few days.
Unlike Evergrande, Sinic is not faced with an imminent default, but it does have a 9.5% $246 million bond due on Oct. 18 and Fitch Ratings revised its outlook to negative last week.
"It’s the same story as everywhere else -- investors are concerned about the liquidity," said Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings Co Ltd. “I think there are most likely some margin calls on some of the major shareholders” by looking at Sinic’s stock price pattern this afternoon.
The crash came as Hong Kong’s property gauge plunged the most since May 2020 amid growing investor angst about China’s real estate crackdown and worries that Beijing may tighten grip on the city’s property sector in its “Common Prosperity” campaign. As discussed extensively last night, risk-off sentiment in financial markets exploded on Monday, with contagion from Evergrande spooking global markets, and as Chinese junk bond yields have soared to the highest level since 2011.
More ominously, even China's CDS are starting to move sharply wider.