Top Stock Market Highlights of the Week: China Evergrande, Oil Prices and CapitaLand Investment Limited

Welcome to this week’s edition of top stock market highlights.

China Evergrande Group (HKSE: 3333)

In a blow to China’s financial markets, China Evergrande Group was ordered by a Hong Kong court to liquidate.

The beleaguered property developer is saddled with more than US$300 billion of total liabilities and is the world’s most indebted developer.

Evergrande had been unable to offer a viable restructuring plan despite delays lasting several months along with court hearings.

Despite the ruling, CEO Siu Shawn has assured that the company will ensure home-building projects are delivered.

According to him, the liquidation order does not affect the operations of Evergrande’s onshore and offshore units.

All eyes will focus on the liquidation process which is expected to be complicated, especially when it comes to the treatment of foreign creditors.

As a recap, Evergrande defaulted on its debt back in 2021 when it had around US$240 billion of assets.

The company had been working on a US$23 billion debt revamp plan with a group of creditors for nearly two years.

An initial analysis cited by Deloitte and Touche during a Hong Kong court hearing in July 2023 estimated a recovery rate of 3.4% on the dollar should the developer be liquidated.

Since then, Evergrande’s chairman Hui Ka Yan and its flagship unit have been investigated for unspecified crimes, causing creditors to expect a recovery rate of less than 3%.

Oil prices

War has led to oil prices rising more than 1% after missiles launched by Iran-backed militants killed US troops in Jordan.

A fuel tanker in the Red Sea was hit, with three US service members tragically killed and many others injured.

These deaths were the first American fatalities from enemy attacks since the Israel-Hamas war began on October 7 last year.

Iran’s foreign ministry has denied involvement in the attack but the Biden Administration has vowed to take any action to defend the US and its troops.

Despite the initial surge, oil prices later settled back down with Brent futures touching US$82.4 per barrel and West Texas Intermediate dropping by 1.6% to close at US$76.78 per barrel.

The declines were due to anxiety in the oil market about China’s economy and the crude oil production in the US.

CapitaLand Investment Limited (SGX: 9CI)

CapitaLand Investment Limited, or CLI, has formed a RMB 2.4 billion joint venture (JV) with AIA Life Insurance, a unit of AIA Group Ltd (HKSE: 1299).

The formation of this JV is to recapitalise Capital Square Beijing, a property with a gross floor area of 44,759 square metres.

Under the JV, CLI will dispose of a 95% stake in the property to AIA while holding the remaining 5% stake, as part of its ongoing asset-light strategy.

CLI will, in turn, provide asset management services to the JV, which will contribute to its recurring fee income.

Capital Square Beijing was acquired by CLI back in October 2022 through a court auction.

The group then undertook an asset enhancement initiative to upgrade and optimise the property, revitalise its tenant mix, and improve operating efficiency.

This move is the second time that CLI is partnering with AIA in China following the latter’s investment in one of CLI’s RMB funds in 2022.

Over the past year, a total of RMB 3 billion has been divested by CLI in China.

China remains a core market for CLI and the property giant has more than 200 properties across 40 cities with total assets under management of S$45 billion.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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