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What’s happening with the Evergrande share price and what does it mean?

Here’s what might be driving the Evergrande share price higher today.
The post What’s happening with the Evergrande share price and what does it mean? appeared first on The Motley Fool Australia. –

The China Evergrande Group (HKG: 3333) share price is the talk of the town today as the world’s most indebted company continues to make headlines.

But despite the (mostly) bad press, the company’s share price is gaining.

Right now, the Evergrande share price is around 52 cents. That’s 10.11% higher than its previous close and 23% higher than it was at the end of last week.

Evergrande’s business is in property development and its listed on the Hong Kong stock exchange. Evergrande reportedly has more than $400 billion of debt in its books.

So, what’s going on with Evergrande and its share price? Let’s take a look.

A quick refresher

Evergrande has been in focus for a number of weeks after it warned the world that it might not be able to make the payments on its debt, forcing it to default.

That in itself isn’t such a huge issue. It’s what might happen if the company did go belly-up that’s got global markets worried.

The company is, of course, a huge part of China’s economy. Additionally, as the Wall Street Journal reports, China’s market is hugely property-dominated and some market analysts predict Evergrande’s collapse could wobble the entire Chinese economy.

A major impact on an economy as big as China’s might have a ripple effect on other global economies. Further, according to reporting by Reuters, many global investment companies are exposed to Evergrande’s debt.

For that reason, the company’s challenges have rattled investor confidence. Especially, in Australian sectors typically dominated by China, such are iron ore.

What’s driving the Evergrande share price lately?

It’s unclear as to exactly why the Evergrande share price is taking off this week. However, there are theories.

As my Foolish US colleague recently reported, China’s Central Bank has promised to protect those exposed to the housing market from the potential collapse of Evergrande.

Some investors might be interpreting the news as a guarantee the Chinese Government will bail out Evergrande. However, that’s likely not the case.

That line of thinking is made more unlikely by reports the Chinese Government is hinting for firms and developers to buy assets from Evergrande. Doing so would likely reduce the impact of a collapse, according to Business Insider.

Other outlets, such as Reuters, have reported the recent gains might be to do with short sellers. Of course, some investors are likely attempting to cash in on the drama surrounding Evergrande.

Though, it hasn’t been a picnic for the Evergrade share price lately. It tanked last week as it looked to default on its debt ahead of an US$83.5 million bond interest payment, due last Thursday.

Luckily, the company managed to avoid defaulting on the back of the payment – which, according to the BBC, it missed.

Another payment, this time worth US$47.5 million, is reportedly due today.

The post What’s happening with the Evergrande share price and what does it mean? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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