China's real estate giant, Country Garden, has recently made headlines after successfully resuming trading on the Hong Kong Stock ExchangeThis marks a significant moment for the company and the broader property market, which has been grappling with various challenges over the past few years.

On the morning of January 21, Country Garden issued a notice confirming that it had met all the requirements outlined for re-listing by the board of directorsConsequently, the company applied to the Hong Kong Stock Exchange (HKEX) to resume trading of its shares effective from 9 a.m. that day.

Country Garden was previously suspended from trading on April 2, 2024, due to its failure to publish timely financial reportsThis suspension affected not only Country Garden, but also several other real estate companies in China, including Evergrande and Contemporary Land, who faced similar issues with their financial disclosures.

On January 14, 2025, Country Garden released its financial results for the fiscal year 2023 and the first half of 2024, which revealed that it had satisfied the key conditions for resuming trading set forth by the HKEX.

Before its suspension, on March 28, 2024, Country Garden's stock was priced at HKD 0.485 per share, with a total market capitalization of HKD 13.57 billion.

As trading resumed on January 21, after a suspension of over nine months, the market responded positivelyCountry Garden's share price surged close to 30% at one point, ultimately closing at HKD 0.60 per share, representing an increase of 23.71% and pushing its market cap above HKD 16.7 billionAdditionally, other stocks in the Hong Kong real estate sector, such as Vanke Enterprises, also saw gains of over 12%.

Trading Resumes After Over Nine Months of Suspension

The long-awaited resumption of trading on January 21 was a significant milestone for Country Garden.

The primary reason for the suspension was the company's inability to meet the regulatory requirement of releasing its annual performance report for 2023 by March 31, 2024. This resulted in a trading halt starting on April 2, 2024.

After Country Garden issued its financial reports on January 14, it cleared a critical hurdle on its path to re-listing.

The financial disclosures revealed that for the whole of 2023, Country Garden achieved a total revenue of approximately RMB 401 billion, a reduction of about 6.8% year-on-year, alongside a pre-tax loss of around RMB 167.3 billion.

Analysts questioned why the losses for 2023 were so extensive

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A spokesperson from Country Garden explained that since 2021, the real estate market has been in a downward cycle, leading to continued declines in both volume and price, resulting in significant impairment of related asset valuesTo reflect these market changes accurately, the company accounted for impairment of construction properties and ongoing sales properties amounting to approximately RMB 82.4 billion.

Additionally, macroeconomic factors, industry conditions, and the negative financial status of counterparties contributed to the risk of uncollectible receivables, resulting in net impairment losses of financial assets and financial guarantees of about RMB 37.2 billionCollectively, these two items accounted for 71.5% of the pre-tax loss.

Moreover, during the reported period, Country Garden incurred approximately RMB 18 billion in marketing and promotional expenses, RMB 5.5 billion in net financial costs, and recorded net losses from other income and expenses of around RMB 10.3 billion, alongside various other complex factors.

Forecasting Profit Recovery Remains Uncertain

Despite the dire circumstances, the series of financial reports from Country Garden also hinted at some positive trends.

For the first half of 2024, Country Garden reported a total revenue of around RMB 102.1 billion, which marked a year-on-year decrease of approximately 54.9%, and a pre-tax loss of around RMB 10.8 billionThis indicates significant improvements in the company’s loss situation when compared to 2023.

Insiders familiar with Country Garden's operations suggested that while the market remains sluggish in the first half of 2024, the substantial impairment provisions made in 2023 meant that the need for further write-downs on inventory has notably decreased; therefore, they anticipate a considerable reduction in losses for the entire year of 2024.

By June 30, 2024, Country Garden still maintained a net asset value of RMB 74.1 billion, which is a positive outcome compared to market expectations.

When will Country Garden return to profitability? According to sources close to the company, it remains uncertain at this time

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