Evergrande shares suspended from trading in Hong Kong amid rumours of majority acquisition

Investors are surrounded by police and security personnel as they try to enter Evergrande's headquarters in Shenzhen on September 23. Photo / AP

Shares in troubled real estate developer China Evergrande Group and its property management unit Evergrande Property Services have been suspended from trading in Hong Kong.

The companies' filings did not specify why the shares were stopped from trading on Monday.

Cailian, a Chinese online news service affiliated with the state-run newspaper Securities Times, said another developer, Hopson Development Holdings, was planning to acquire a majority share in Evergrande Property Services Group.

Trading in Hopson's shares was also suspended on Monday in Hong Kong, "pending the release of announcement[s] in relation to a major transaction of the company under which the company agreed to acquire the shares of a company ... listed on the stock exchange", it said in a filing.

Hopson's public relations department said the company would not comment on "market rumours".

Phone calls to Evergrande's PR office in Hong Kong weren't answered and the company's offices elsewhere in China were closed for a holiday.

Evergrande has been struggling to avoid defaulting on billions of dollars of debt. The company owes billions to banks, customers and contractors and is facing a cash crunch.

Its situation worsened after the Chinese government tightened limits on corporate debt levels.

The company ran up billions of dollars in debt building apartment complexes, malls and office towers over the years.

In August 2020, the government ordered tightened controls on financing for China's 12 biggest developers, forcing them to reduce corporate debt loads that are seen as a threat to the economy.

Evergrande has been selling off various assets to try to alleviate the problem. Its shares have lost more than 80 per cent of their value this year.

Like Evergrande, Hopson, based in Guangdong adjacent to Hong Kong, is one of China's biggest property companies. Reports show it has a much lower debt to equity ratio than its largest rivals.

Jitters over a slowdown in China's economy and potential turmoil in its vital property industry have rattled world markets in the past few weeks.

Hong Kong's benchmark Hang Seng index dropped 2.3 per cent Monday on heavy selling of real estate companies and banks.