Evergrande's rising default risks shift focus to possible Beijing rescue

HONG KONG/NEW YORK: Persistent default fears eclipsed efforts by China Evergrande Group's chairman to lift confidence in the embattled firm on Tuesday, as Beijing showed no signs it would intervene to stem any domino effects across the global economy.

Analysts played down the threat of Evergrande's troubles becoming the country's "Lehman moment," though concerns about the spillover risks of a messy collapse of what was once China's top-selling property developer have roiled markets.

In an effort to revive battered confidence in the firm, Evergrande Chairman Hui Ka Yuan said in a letter to staff the company is confident it will "walk out of its darkest moment" and deliver property projects as pledged.

In the letter, coinciding with China's mid-autumn festival, the chairman of the debt-laden property developer, also said Evergrande will fulfil responsibilities to property buyers, investors, partners and financial institutions.

"I firmly believe that with your concerted effort and hard work, Evergrande will walk out of its darkest moment, resume full-scale constructions as soon as possible," said Hui, without elaborating how the company could achieve these objectives.

Investors in Evergrande, however, remained on edge.

Its shares fell as much as 7%, having tumbled 10% in the previous day, on fears its $305 billion in debt could trigger widespread losses in China's financial system in the event of a collapse. The stock ended down 0.4%.

Other property stocks such as Sunac, China's No.4 developer, and state-backed Greentown China on Tuesday recouped some of their hefty losses in the previous session. The Hong Kong property sector index rose nearly 3%.

"There must be negotiations behind the scenes about a systemic recapitalization (of Evergrande) by state proxies," said Andrew Collier, managing director of Hong Kong-based Orient Capital Research.

"If one piece of Evergrande's debt is allowed to default, it would trigger questions about all of their remaining debt from investors and the government doesn't want a wider crisis like that," he said.

The Chinese government has been largely quiet on the crisis at Evergrande in recent weeks.