China’s weaker developers tumbled in Friday trading as exchanges issued risk warnings, including the potential for delisting.
(Bloomberg) — China’s weaker developers tumbled in Friday trading as exchanges issued risk warnings, including the potential for delisting.
Shanghai Shimao Co., Yango Group Co. and Myhome Real Estate Development Group Co. were all down by the 5% trading limit. Sundy Land Investment Co. lost as much as 4.7%.
The selling pressure on these developers, two of which are already in default, is a fresh reminder of the challenges they face in accessing funds as an unprecedented housing crisis unfolds. In contrast, industry peers that have made progress on debt restructuring, such as Sunac China Holdings Ltd., are faring better as investors look past their repayment failures.
“Delisting could hurt any restructuring proposals with debt to equity swaps, as the unlisted equity is then no longer liquid,” said Kristy Hung, a Bloomberg Intelligence analyst. “The offshore rally is led by Sunac’s restructuring deal.”
The Shanghai and Shenzhen stock exchanges imposed a one-day trading suspension on the companies’ shares Thursday after downgrading their status to the so-called ST category, placing curbs from pricing to transaction volume. The upper or downward daily trading band for such stocks also narrowed to 5% from 10% for regular firms.
The trading halt and downgrades came after the bourses issued risk warnings about the four stocks, including one on delisting for Sundy Land after its auditor issued negative opinions on its financial report. Defaulters Shimao and Yango received other types of warnings for the same reason. Myhome’s warning resulted from three consecutive years of losses.
The developers’ bigger rivals, some of which have received state help with refinancing, rallied after Sunac China secured overwhelming creditor support for its restructuring effort. A Bloomberg Intelligence index tracking major Chinese developers rose 3.1%, led by Sunac’s 16% jump.
–With assistance from Alice Huang and Mengchen Lu.
(Updates with chart)
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