Evergrande and EV unit shares surge after president reports business change

A traffic light is seen near the headquarters of the China Evergrande group in Shenzhen, Guangdong province, China on September 26, 2021. REUTERS / Aly Song / File Photo

HONG KONG, Oct. 25 (Reuters) – Shares of China Evergrande Group (3333.HK) jumped 4% on Monday after the ailing property developer announced plans to prioritize growing its electric vehicle business in relation to its core real estate activities.

China Evergrande New Energy Vehicle Group Ltd (0708.HK) stock jumped 17%, against a 0.3% drop in the Heng Seng (.HSI) index.

Evergrande, reeling from more than $ 300 billion in liabilities, appeared last week to avoid a costly default with a last-minute bond coupon payment, buying it an extra week to fight a debt crisis imminent.

Evergrande chairman Hui Ka Yan said on Friday evening that the company would aim to make its new electric vehicle its core business, rather than real estate, within 10 years.

Property sales will slow to about 200 billion yuan ($ 31.31 billion) per year by that date, from more than 700 billion yuan last year, he added, the Securities Times reported, supported by the state.

The developer said separately on Sunday that it had resumed work on more than 10 projects in six cities, including Shenzhen. Many of its projects across the country had been halted due to payments owed to suppliers and contractors.

Also boosting general confidence, state media Xinhua said in an article Monday that the ripple effect of debt default risks of Chinese real estate companies on the financial sector would be controllable.

The report follows comments from senior officials, including Vice Premier Liu He and central bank governor Yi Gang last week, who also said that real estate companies were facing default issues due to poor management and an inability to adapt to changes in the market.

Reporting by Clare Jim and Donny Kwok; edited by Richard Pullin and Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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