China Evergrande Group was down by more than 10% in Hong Kong at midday on Thursday, while one of its most profitable units, Evergrande Property Services, was down 6.45%.
On Wednesday, Evergrande announced that it had officially abandoned its plan to sell a 50.1% stake of Evergrande Property Services, saying there was “no guarantee” it could meet its financial obligations to stay afloat. The property developer has debts of approximately $305 billion. However, due to a government crackdown on lending and a slump in property sales, Evergrande is rapidly running out of cash. Since September, it has been trying to offload assets to generate the cash required to repay creditors, including the 1.6 million homebuyers who have purchased currently-unfinished properties from the company.
Concern that a cash crunch at Evergrande could lead to economic contagion has seen swathes of other indebted property developers hit with credit rating downgrades. Some smaller property developers have already defaulted.
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