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Chinese property developer Sinic Holdings Group’s shares tumbled 87 per cent in Hong Kong before its halted trading on Monday and the company did give any reason for the trading halt.
The sudden selloff in the last two hours leading up to the trading suspension was accompanied by a surge in trading volume that was about 14 times its average in the past year.
The share plunge has slashed its market value to just under $230 million, which is tiny for a listed developer in the city.
The company’s dollar bonds have also been plunging. On September 17, Sinic Holdings’ dollar bonds that mature in October tumbled by 25.5 per cent, their biggest drop on record.
Fitch Ratings last week revised the Outlook on the homebuilder Sinic Holdings’ Long-Term Issuer Default Rating to Negative, from Stable, and has affirmed the rating at ‘B+’. Fitch has also affirmed Sinic’s senior unsecured rating at ‘B+’ with a Recovery Rating of ‘RR4’.
The Negative Outlook reflects Sinic’s weakened access to the debt capital market and the rising execution risk of its high-churn business strategy, the rating agency said.
Sinic’s access to offshore debt capital markets has significantly weakened due to poor investor sentiment, Fitch said.
It has three offshore maturities totalling $694 million due in October 2021, January 2022 and June 2022. Its bonds due in 2022 are trading at a 20 – 25 per cent discount, meaning Sinic may have to repay all three bonds with cash on hand, said Fitch.
Fitch’s move came after S&P Global Ratings affirmed the “B” Local Currency LT credit rating of Sinic Holdings on September 10, 2021, but revised outlook to negative from stable.
According to Chinese news outlet The Paper, the company plans a pay cut for everyone working at the headquarter, with Vice President to see 70 per cent pay cut, General Manager 60 per cent and Director 50 per cent.
Notably, the developer came into spotlight in July this year due to a letter for help said to be written by its chairman circulating online, although the company later dismissed the letter as fake.
According to the letter, the chairman Zhang Yuanlin was a victim of a financial fraud during the the process of its initial public offering and was forced to borrow usurious loans.
“It’s the same story as everywhere else – investors are concerned about liquidity,” said Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings, “I think there are most likely some margin calls on some of the major shareholders” by looking at Sinic’s stock price pattern this afternoon.
The sharp move comes as Hong Kong’s property gauge dropped the most since May 2020 amid growing investor angst about China’s real estate crackdown and worries that Beijing may tighten grip on the city’s property sector in its “Common Prosperity” campaign.
Risk-off sentiment in financial markets was widespread on Monday. Junk-rated Chinese dollar bonds slid by as much as 2 cents. The Hong Kong dollar fell to the lowest level this month.