The encyclopedia · Trading & Investing · Financial decision · 2021
Chinese Estates lost HKD 1.38B on Evergrande shares — a 12-year bet ended in fire sale
Joseph Lau's investment firm sold 108.9 million Evergrande shares at a loss of HKD 1.38B, ending a 12-year relationship with the developer.
Chinese Estates Holdings · China Evergrande Group · 2021-09-21
What happened
Chinese Estates Holdings was a Hong Kong-listed investment holding company controlled by billionaire Joseph Lau, who was also known for his conviction for bribery in Macau. The company was one of the largest and longest-standing shareholders in China Evergrande Group, the embattled Chinese property developer.
In 2021, as Evergrande's debt crisis deepened, Chinese Estates sold 108.9 million Evergrande shares in the open market between August 30 and September 21. The shares were sold at an average price of HKD 2.26 each, raising only HKD 246.5 million — a fraction of what the company had paid for them over 12 years of accumulated holdings.
The disposals resulted in a total loss of approximately HKD 1.38 billion ($170 million). Chinese Estates subsequently announced plans to delist from the Hong Kong Stock Exchange, citing the need to restructure after the massive investment loss.
The case exemplified the dangers of concentrated single-stock exposure in a related-party investment. Joseph Lau's personal fortune was also hit hard by Evergrande's collapse, with estimates of his total Evergrande-related losses reaching $2 billion including personal holdings.
Why it happened
- Chinese Estates held a massive concentrated position in Evergrande shares for over a decade — a single-stock bet that worked until China's property crisis hit.
- When Evergrande's debt crisis erupted in 2021, the shares collapsed and Chinese Estates was forced to sell at a tiny fraction of its purchase price.
- The company had no diversification strategy for its Evergrande holdings, treating a related-party investment as a long-term store of value rather than a concentrated risk.
The lesson
A 12-year bet on a single developer is not an investment — it is a gamble that your cousin will not go bankrupt. Chinese Estates learned that family ties do not protect against a property crisis.
Sources
- Wikipedia — List of trading losses
- EdgeProp — Chinese Estates cuts losses after 12 years as Evergrande's biggest ally
- MarketScreener — Chinese Estates Offloads More Evergrande Shares Worth $146 Million
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