Photographer: David Paul Morris/Bloomberg

Chinese Developers Surge in Hong Kong as Evergrande Hits Record

Updated on
  • Evergrande climbs 23 percent to more than triple this year
  • Chinese property shares are top gainers in Asia in 2017

Chinese developers extended Asia’s biggest rally this year, with China Evergrande Group surging to a record in Hong Kong.

Evergrande soared 23 percent at the close, while Country Garden Holdings Co. and Sunac China Holdings Ltd. gained more than 9 percent. Lianhua Supermarket Holdings Co. rallied 24 percent after Alibaba Group Holding Ltd. agreed to buy a stake in the company. The Hang Seng Index added 0.2 percent, while the MSCI China Index rose 0.2 percent toward its highest level since July 2015. Mainland markets are closed for holidays till Wednesday.

Shares of Evergrande, the world’s most indebted developer, have more than tripled this year, topping all others on the MSCI Asia Pacific Index. While the stock isn’t alone among Chinese developers in doing well, with rivals Country Garden and Sunac China being the next best performing in the region, the acceleration in gains is raising questions. JPMorgan Chase & Co. said in a note received Friday that Evergrande’s business isn’t sustainable.

Evergrande trades at about 36 times reported earnings, more than double the valuations of Country Garden and Sunac, while Monday’s gain alone added $4.7 billion to its market value. The rally is also squeezing short sellers and defying analyst expectations. Bearish bets accounted for 20.7 percent of its free float on May 25, according to IHS Market Ltd. data, while its share price is 113 percent higher than consensus analyst estimates for the next 12 months.

Read More: Evergrande's Boss Sees His Wealth Surge

  • Huaneng Power International Inc. and China Resources Power Holdings Co. jumped 5.7%, while Datang International Power Generation Co. rose 3.6% after the three stocks were upgraded by Citigroup Inc.
  • Fufeng Group Ltd. tumbled 9.6% to HK$4.26, its lowest close since Jan. 16, after the company said late Friday that its executive director and chief financial officer resigned.
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