(Yicai Global) Dec. 6 -- China Evergrande Group’s shares fell to their lowest closing price in almost five years after the debt-ridden real estate developer said there was “no guarantee” it would have enough funds to repay debt.

Evergrande [HKG: 3333] plunged almost 20 percent to end today at HKD1.81 (23 US cents), the lowest since February 2017.

The Shenzhen-based homebuilder may not be able to meet its obligation to guarantee payment on a USD260 million note, it also said in a filing to the Hong Kong Stock Exchange on Dec. 3, adding that that may cause creditors to ask for repayments to be speeded up. 

Chinese regulators said the same day that Evergrande’s first potential default on a US dollar bond would not majorly affect the capital market, as any spillover effect would be controllable.

Financial debt accounted for about a third of Evergrande's total, its structure is relatively dispersed, and the amount of its financial investments is quite small, a China Banking and Insurance Regulatory Commission spokesperson said. It would not have any negative impact on the normal operation of China’s banking and insurance sector, the person said. 

Mainland stock markets are generally operating stably with relatively strong resilience and high activity, the CSRC said, noting that the default rate in the exchange bond market remains at a low level of about 1 percent and the financial indicators of listed real estate companies and bond issuers are generally robust. 

The US dollar debt market is highly market-oriented and has relatively mature investors and intense scrutiny by ratings agencies, the People’s Bank of China said, adding that short-run risks at individual developers will not affect the market’s normal financing operations in the medium and long term. Evergrande’s risks are attributable to its poor management and blind expansion, the central bank said.

After Evergrande’s filing, the Guangdong government summoned founder Xu Jiayin for talks and sent a working team to its property arm Evergrande Real Estate to work on risk management, strengthen internal control and management, and maintain normal operations. 

In September, financial regulators eased credit policy after the real estate market declined in the second half of the year due to exposure to individual developers’ debt risks.  

The activities of financial institutions have returned to a normal state, according to an article published yesterday by PBOC publication Financial News. Property loans issued last month are likely to be about CNY200 billion (USD31.4 billion), higher than a year ago, it noted, adding that onshore bonds issued by developers last month jumped 84 percent to CNY47.1 billion (USD7.4 billion) from a month earlier. 

The balance of personal mortgages was CNY348.1 billion in October, up CNY101.3 billion from September, earlier PBOC data showed. Property loans issued in October rose over CNY150 billion from September, CNY50 billion of which are loans for property development. 

Editors: Liao Shumin, Futura Costaglione