Evergrande stock cost of borrowing hits new high amid debt fears

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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

SINGAPORE, Sept. 27 (Reuters) – The cost of borrowing China Evergrande shares (3333.HK) skyrocketed last week, according to data from research firm FIS Astec.

Short sellers borrow stocks, sell them, and hope to buy them back at a lower price. They pay a fee equivalent to annualized rates of 92%, according to FIS Astec figures as of September 23.

This is 50% more than two weeks ago.

Only about 2.2% of Evergrande’s outstanding shares are on loan, according to the data. The Chinese developer owes $ 305 billion, lacks cash and its share price is down 83% this year.

Market participants said soaring borrowing costs reflected both growing enthusiasm for short positions in the company and a rush to find stocks to borrow as lenders recalled stocks to get rid of their positions. Read more

The borrowing costs of some other developers have increased, but not to the same extent, according to FIS Astec.

Guangzhou R&F Properties (2777.HK) stock annualized rates, for example, fell from less than 1% at the start of the month to 6.6% on September 23.

Borrowing costs have jumped in recent months

Reporting by Tom Westbrook; Editing by Alexander Smith

Our Standards: Thomson Reuters Trust Principles.


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