Evergrande’s collapse will impact banks

On Monday, Evergrande’s stock price fell 10.2% in Hong Kong, the latest blow impacting the Chinese property giant that has been on a downward curve for 8 months.

Today’s selloff reflects growing concerns expressed by investors that Evergrande will default on part of its $300 billion debt this week—$120 million in interest on two bond notes that is due later this week.

The bonds have a 30-day grace period, but the company’s bond prices suggest that investors think default will be eventually the most probable outcome.

Since January 2021, Evergrande’s stock price in Hong Kong has dropped from 14.1 HKD ($1.81) to 2.3 HKD ($0.3), sinking the company’s valuation from $24 billion to $5 billion as Evergrande’s reputation is deteriorating and this is expected to impact the Chinese as well as the global banking systems.