What happened
Shares of China Evergrande Group (EGRN.Y) continued to rally Friday after China's second-largest property developer earlier this week made debt payments on its bonds, and as Chinese regulators mull actions that would help debt-saddled developers in the country. The stock had risen more than 18% as of 1 p.m. EST.
So what
For several months now, the market has been concerned that China Evergrande Group would default on its debt payments, a move that would disrupt markets all over the world. Some even compared the event as potentially similar to what happened with Lehman Brothers during the Great Recession.
On Wednesday, the deadline for the debt payments, investors were concerned that China Evergrande Group might not be able to meet its obligations. But the developer came through just in the nick of time and made the payments, once again avoiding default.
Then yesterday, media outlets reported that Chinese regulators may ease some restrictions related to how much debt developers can take on. The restrictions, according to The Wall Street Journal, make it difficult for developers to sell assets and use the proceeds to pay off existing debt.
Image source: Getty Images.
Now what
While I am sure that an easing of regulations would help China's beaten-down real estate sector, the Chinese real estate market is clearly very uncertain right now with a lot of potential downside. I am staying away.
