China’s Hywin hits record low over missed payments amid property woes
SHARES of Chinese wealth manager Hywin Holdings fell by nearly 18 per cent to a record low last Friday (Dec 15) after it said that it has been unable to promptly fulfil its client redemption requests.
Hywin is a small player, with total assets of 2.37 billion yuan (S$446.5 million) as at the end of June, according to company documents. But its troubles show how China’s faltering property sector is causing strain throughout the financial system.
Hywin, whose products are primarily invested in real estate, announced last Thursday that asset managers for some products the company distributes were unable to reach an agreement with “relevant clients” to defer their redemption requests.
Failure to resolve these redemption issues could “materially and adversely” impair its reputation, client relationship, business, financial condition and prospects, it said.
The company’s shares dropped to as low as US$2.28, its lowest level on record, after plunging by more than 50 per cent in the last two trading sessions, weighed down by the news. The stock is now down nearly 60 per cent year-to-date. It had gone public on the Nasdaq for US$10 in March 2021.
“Hywin could be yet another falling domino in the Chinese property chain,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank. “It serves as a stark reminder of the fragile health of the Chinese property market, despite the government’s efforts to slow down the haemorrhage.”
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The debt crisis emanating from China’s beleaguered property sector is one of the main headwinds to the country’s economic growth, and it has led to the downfall of some of the biggest real estate developers, including Evergrande Group and Country Garden.
Defaults by some of these developers since late 2021 have impeded economic growth and rattled global markets.
Hywin’s announcement on Thursday followed market chatter on social media that the firm missed payments on some investment products. The company said it has formed a special investigation committee comprised of senior management to oversee an internal investigation to the payment delays.
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It did not immediately respond to a Reuters’ request for comment.
Hywin derives most of its revenues from distributing real estate products, including those investing in projects from Evergrande and Sunac China Holdings.
Net revenue from real estate products accounted for 88.8 per cent of its wealth management services in the year to Jun 30, 2020, according to data from the company’s latest available prospectus.
Hywin is the latest Chinese financial services provider to report redemption failures on its products.
In July, Zhongrong International Trust Co, a trust firm controlled by leading Chinese wealth manager Zhongzhi Enterprise Group, missed payments on dozens of investment products.
“The news about Hywin clearly aligns with the challenges faced by other struggling property firms,” Ozkardeskaya said.
“Nevertheless, global repercussions will likely remain limited as international investors have largely divested, and many investors know that the situation may get worse before it gets better.”
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