Wednesday, October 27

Evergrande bang of about 390 million for the Petroleum Fund – E24


Chinese real estate giant China Evergrande has lost much of its market value since the New Year. It also affects the Global Government Pension Fund.

Evergrande warned in late August that it may not be able to meet its payment obligations. Here from a housing, shopping and entertainment project in Taicang, Suzhou, which has been halted.

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One of the world’s largest and most indebted real estate developers, China Evergrande, fell hard on the Hong Kong Stock Exchange on Monday. At the close of the deal, another 10.2 percent of the company’s market capitalization was lost.

Since the new year, the Evergrande exchange rate has fallen by about 84 percent, to the current exchange rate of around HK $ 33.6 billion, which corresponds to about HK $ 38 billion.

This is bad news for Evergrande founder and president Xu Jianyi, who owns 71 percent of the company.

Big waste of paper

But it’s also potentially bad news for a much more modest shareholder with more national roots. At the beginning of the year, the Government Pension Fund Global, better known as the Oil Fund, owned just under 0.21% of China Evergrande.

In the New Year, Norway Post was valued at NOK 462.5 million, according to Norges Bank Investment Management (NBIM), which manages the fund.

Assuming the portfolio does not change, the price drop corresponds to a paper loss of NOK 387.5 million.

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Inside since 2010

However, it is not known at what levels the Petroleum Fund has purchased, or whether the fund has increased or decreased its holdings since joining.

The NBIM website claims that the Petroleum Fund has been exposed since 2010.

The China Evergrande property position was valued at about NOK 150 million at the end of 2016, and at about NOK 730 million at the end of 2019, according to the website.

The ownership position was listed in Evergrande Real Estate Group Ltd, prior to the name change in 2016.

The NBIM portfolio will appear for the first time with a value of around NOK 30 million, at the end of 2010. After that, the item will increase to about NOK 217 million by the New Year 2015.

The NBIM website also states that the fund by the end of the year no it is directly exposed to Evergrande’s debt in the fixed income market (bonds).

The case continues below the image.

Evergrande shares fell to their lowest level since 2010 on the Hong Kong Stock Exchange on Monday. Here, unfinished apartment blocks under the auspices of Evergrande, Luoyang, China, September 2021.

Payment problems

Evergrande has a debt equivalent to more than NOK 2.5 billion and around 1.5 million homes under construction in more than 200 cities.

The company notified in end of august that he was in danger of not being able to meet his credit obligations. This creates uncertainty, among other things, for the payment of interest on the company’s foreign bond loans, which mature on Thursday of this week.

Credit rating agency Fitch responded by downgrading Evergrande’s credit rating to double C, stating that some form of default “appears likely,” according to Financial times.

Subsequently, Moody’s colleagues downgraded the rating for the third time in as many months, warning that creditors had “dim prospects” of receiving payment if a default occurs, according to FT.

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Don’t fear bankruptcy

The market fears that Evergrande’s woes could spread to the rest of China’s real estate sector, which is estimated to make up 15 to 30 percent of the economy.

Credit analysis manager Pål Ringholm at Sparebank 1 Markets recently pointed out to E24 that Evergrande was the most valuable real estate company in the world just three years ago.

Today, the market is 100 percent in technical bankruptcy, according to him.

– I think the Chinese authorities will try to avoid a Lehman moment (bankruptcy, editor’s note) and will try to secure a debt restructuring. The Chinese will not allow the biggest banks to fail, says Ringholm.

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Up to 1 billion

As of Monday, the Oil Fund is worth more than NOK 11.9 billion.

At the end of the year, the portfolio was NOK 10.9 billion, spread over 11,200 investments in 72 countries. Equity investments then amounted to almost NOK 8 billion, spread over more than 9,100 companies.

NBIM does not wish to comment on the matter beyond referring to the inventory on the fund’s website.

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