Evergrande Says Work Moving Ahead at More Than 10 Stalled Projects

Shares of debt-stricken China Evergrande saw a brief surge Monday after the developer sought to ease investor anxiety by announcing that work had resumed on more than 10 residential projects in six cities of Guangdong province.

In a WeChat post on Sunday, the embattled builder said construction was proceeding at developments in its home patch of Shenzhen, as well as in Dongguan, Jiangmen, Shanwei, Zhuhai and Zhongshan.

“Shenzhen Evergrande City Light, Jiangmen Evergrande Quandu and Zhongfu Evergrande Yufu have reached the stage of interior decoration and will be gradually delivered to the homebuyers,” the group said. “Shenzhen Evergrande City, Dongguan Evergrande Yuelongtai, Zhuhai Evergrande Binjiang Left Bank, etc have recently been topped out.”

Evergrande’s Hong Kong-listed shares opened Monday’s session up 4 percent at HK$2.80 ($0.36) on the news, but the rally was short-lived and the stock finished the day down 0.7 percent at HK$2.67.

No Idle Hands

In a separate WeChat post decorated with photos of busy workers at various sites, Evergrande noted that more than 40 projects are under construction across the mainland, including in Guangzhou, Foshan, Zhaoqing, Yangjiang, Qingyuan, Huizhou and Heyuan.

The world’s most leveraged developer struck a note of continuity as it tried to shore up confidence among buyers shaken by the liquidity crisis threatening Evergrande and rivals like Sinic and Shimao.

“From making a dream life to quality housing, our quality remains the same,” the group said. “We promise to never change and deliver perfect houses.”

The latest assurances came after Evergrande reportedly avoided default on a set of dollar-denominated notes last week. A source told Reuters on Friday that the group had transferred $83.5 million to a trustee account at Citibank on Thursday, allowing it to pay all bondholders before the payment grace period was to end on Saturday.

Resurgent Sales a Must

Tommy Wu, lead economist at Oxford Economics, told Mingtiandi that a revival of home sales could be the cash-strapped developer’s best shot to stave off catastrophe.

“It is certainly encouraging to see construction work at some of Evergrande’s sites has restarted,” Wu said. “This is positive to sentiment and we can be less worried about construction work stalling for Evergrande and more generally for the real estate sector.”

But he cautioned that Evergrande’s home sales have plunged, an attempt to sell the group’s property management unit fell through, and the developer is finding it increasingly difficult to make debt repayments.

The analyst painted a dire picture of the broader sector as well, with developers’ financing costs expected to spike further and funding from the offshore market having almost completely dried up.

“Domestic credit and receipts from new home sales will be crucial for the sector to stay afloat,” Wu said. “But given that new home sales have fallen sharply in recent months, the whole sector will likely remain under significant stress for the months or even quarters ahead.”

Pimfha Chandhapradit provided research for this story.