Chinese real estate companies are still facing tough times, with their stock prices taking another hit recently. The largest property developer in China, Evergrande, saw its stock plummet by 21% on Monday because it suddenly called off important meetings with its creditors. This has caused a lot of anxiety in the market, and there’s a growing concern that this crisis could affect other industries, especially commodities.
Chinese real estate shares experience their most significant daily decline of the year in 2023.
The property market in China seems to be in a constant state of trouble. On Monday, the prices of stocks in this industry experienced the biggest drop of the year in 2023. Evergrande was hit the hardest, with a 21% drop in its stock price after it canceled crucial creditor meetings at the last minute.
This property crisis in China started back in 2020 when the country’s major property developers faced immense pressure due to new rules on how much debt they could take on. It didn’t stop at just big players like Evergrande; it also affected other companies like Country Garden, Kaisa Group, Sinic Holdings, Sunac, and more.
This week, Evergrande faced more problems when its unit in mainland China couldn’t pay off a bond it owed. This has added to the uncertainty surrounding the company’s future, especially its plan to reorganize its debts with foreign creditors, which is in a shaky situation. Evergrande canceled important meetings with its creditors suddenly. According to Bloomberg’s report on Monday, the company needs to rework its debt restructuring plan. In addition, its money management unit members were detained, and it couldn’t meet the requirements set by regulators to issue new bonds.
The ongoing crisis in the market has also had a significant impact on Chinese stocks. Companies like Country Garden, Logan Group, and China Aouyan all saw their stock prices drop noticeably this week.
The possibility of a spreading crisis is increasing, and the commodity market is at the forefront of this concern.
But, China’s economy isn’t out of trouble just yet. The increasing turmoil is now creating new worries about the crisis spreading to other parts.
To put it simply, the ongoing crisis and the deteriorating confidence among investors could affect other Chinese industries, particularly commodities. This unease was evident in recent price changes, as iron ore prices dropped by over 4% on Monday.
This drop is happening during a time when China typically has strong demand for iron ore. China is the world’s second-largest economy and buys about 70% of the world’s seaborne iron ore. However, this demand could be at risk as the crisis deepens. As a result of all this uncertainty, Chinese property developers have also stopped buying steel for their projects.
Last month, the Chinese government took steps to support the country’s stock market and address its vulnerabilities. Unfortunately, these actions haven’t been very effective in stopping the crisis from getting worse so far.
