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The liquidity crisis at Evergrande, China’s second largest property developer, is weighing on the market mood today — with the surge in energy prices also causing investors growing concerns.

Evergrande, which has total liabilities over $300bn, is scrambling to raise funds as it teeters between a messy meltdown with far-reaching impacts, a managed collapse or a government bailout.

And today, Evergrande’s onshore unit has halted trading in all bonds after a domestic rating cut put it among the country’s riskiest issuers.

Fears over Evergrande’s ability to repay investors have risen in recent weeks, triggered protests and creating anxiety over the implications of a collapse.

Yesterday, Chinese authorities told Evergrande’s major lenders not to expect interest payments due next week on bank loans, taking the cash-strapped developer a step closer to one of the nation’s biggest debt restructurings.

And earlier today, Evergrande’s main unit, Hengda Real Estate Group Co Ltd, applied to suspend trading of its onshore corporate bonds, following credit rating downgrades from rating agencies China Chengxin International (CCXI) and S&P – and increasingly jittery trading.

Reuters explain:

Suspension of trade in Hendga’s onshore corporate bonds indicates an increasing likelihood of defaults and restructuring, market participants said.

A bond trader, who declined to be identified, said that the changes in the trading mechanism were likely aimed at limiting participation and curbing volatility.

“Many companies would adjust the trading mechanism of their bonds ahead of default,” he said.

The crisis is knocking shares across the property sector, at a time when China’s housing sector already appears to be slowing.

China’s CSI 300 stock index has dropped almost 1% today, with Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA reporting that Evergrande is “weighing on sentiment”.

The Evergrande saga, with its $300 billion of liabilities is reaching an endgame, with…