China Evergrande's shares take a hit after building construction accident in Wuhan claims six lives

By Pearl Liu and Daniel Ren pearl.liu@scmp.com / https://www.scmp.com/business/companies/article/3045047/china-evergrandes-shares-take-hit-after-building-construction?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | January 14, 2020 10:36 AM SGT
Shares of China Evergrande Group fell more than 5 per cent in Hong Kong on Tuesday after six people were killed and five others were injured when one of its buildings under construction at an upcoming tourism resort collapsed in Wuhan.
The municipal government's crisis management bureau said that emergency workers spent 24 hours rescuing 11 people trapped under the rubble after the accident on Sunday. All of them were in stable condition. It added that it would now focus its efforts on investigating the accident and cleaning up the site.
Evergrande, China third-largest home builder, is building a massive leisure and tourism project in Badeng New City, in the central mainland city of Wuhan, Hubei province. Wuhan is also at the centre of an outbreak of an unidentified form of pneumonia which has so far seen 59 people admitted to hospital in the city.
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The project is being developed by Wuhan Badengcheng Investment, which is backed by Evergrande. It sits on a site measuring 6.7 million square metres, which was bought for 5.6 billion yuan (US$800 million) in 2017.
The Wuhan government said on Monday that six people were killed in a alt=The Wuhan government said on Monday that six people were killed in a
"We have held urgent meetings since yesterday regarding the incident, including compensation and safety checks at the site," Evergrande said in a statement on Tuesday.
The company, which hopes to become an electric-car powerhouse and take on the likes of Tesla in China, said the accident resulted from the collapse of scaffolding at the construction site.
"We are actively working with local government authorities to handle related issues," the statement said.
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Shares of Evergrande hit an intraday low of HK$20.65 in afternoon trading, sliding 5.1 per cent from Monday's close of HK$21.75. They eventually closed 2.3 per cent lower at HK$21.25.
Safety related issues have been a major problem for the mainland's property sector. There were a series of accidents in 2018 as cash-strapped developers tried to complete their projects in the earliest possible time so that they could start selling flats.
In July 2018, six workers died in Anhui province after an entire construction site run by Country Garden, China's largest developer by sales, collapsed in heavy rain and high winds. A month earlier, there was a fatality at another site in Shanghai.
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"Developers could face punishment and tightened safety checks by authorities after fatal accidents," said Li Liang, a manager at Shanghai Han Ju Real Estate, a property services firm. "The safety problem could eventually cause delays in construction work and add extra cost on the developers."
Meanwhile, Evergrande, which was saddled with US$113.7 billion worth of debt as of early September, kicked off another round of price discounts of up to 13 per cent nationwide to boost home sales.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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