Key Points

• China’s Country Garden, a real estate developer, is set to be removed from Hang Seng Index on Sept 4 and be replaced by Sinopharm.
• Country Garden Services will also be removed from the Hang Seng China Enterprises Index and be replaced by Trip.com following reports that the real estate company is struggling financially.

China’s real estate sector continues experiencing challenges as big companies like Country Garden and EverGrande remain distressed. The two companies, once the largest in the country, are now nearing their end as EverGrande files for bankruptcy and Country Garden shows displeasing business prospects.

Chinese real estate sector continues being hammered as Country Garden and EverGrande go down

Country Garden, once China’s leading property developer, has been struggling to keep afloat in the ongoing economic drawbacks, with its shares plunging 70% YTD (year-to-date). 

This company is not struggling alone in the real estate sector, as its competitor, EverGrande, has also filed for bankruptcy in the US. The ongoing meltdown in the Chinese real estate sector comes as the economy is stalling, proving not as strong as the world expected it to be following the post-Covid 19 open up.

As a result, productivity is decreasing in the country, which is a bad factor as the US and EU are rising against their global supply chains as their economic ties with them sour. In August, Country Garden failed to meet its bond coupon payments, which prompted issuing of a profit warning and suspending the trading of its 11 mainland China bonds.

It also has under 30 days to make the missed coupon payments on two dollar bonds coupons worth $22.5 million. As a result of this dismal performance and displeasing business prospects, the company has been replaced in Chinese Indexes, with bankruptcy remaining in sight.

Keep watching Fintech Express for more updates on this and other fintech-related developments.