Record plunge in China property giant's stock after chair quits

Published Mon, Oct 31, 2022 · 07:23 PM

THE share price of Chinese property giant Longfor Group Holdings tumbled by a record amount on Monday (Oct 31), after its long-serving chair abruptly resigned during a brewing crisis in the country’s real estate sector.

Longfor’s equities plummeted by as much as 45 per cent on Monday morning, before rallying to close down 23.8 per cent at HK$10 ($1.27) per share.

The plunge – the Beijing-headquartered firm’s biggest decline on record – comes on the heels of billionaire founder and chairwoman Wu Yajun’s departure.

Wu “resigned as a director due to her age and health reasons”, the company said in a Friday evening exchange filing, adding its “business operation remains stable with a clear development direction”.

Longfor moved to calm investors on Monday in a separate filing, noting the “unusual fluctuation” in its share price but asserting that the company’s “financial position is healthy and safe”.

A “firmly optimistic” controlling shareholder – owned by Wu’s family – had bought shares on Monday that brought its interest in the company to around 43 per cent, the filing said.

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It added that Longfor had made a partial early repayment of HK$5.1 billion (S$919.7 million) on a loan due next year.

“It’s definitely a negative for the company,” Steve Wong, an analyst at Essence International Financial Holdings, told Bloomberg.

“It doesn’t make sense for the (chairwoman) to suddenly quit during a real estate crisis. Maybe Wu realised there’s little she can do given the situation,” he said.

Property and construction account for around a quarter of China’s gross domestic product, but crippling debts have forced a series of developers to default on loans in recent months while others have struggled to raise cash.

Analysts have raised fears that the crisis could yet spread to the country’s financial sector at a time when Beijing’s hardline zero-Covid policy has also put a lid on growth.

Chinese stocks extended losses on Monday following the release of more dismal economic figures and the tightening of Covid curbs around the country.

The Purchasing Managers’ Index (PMI) – a key gauge of manufacturing in the world’s second-biggest economy – came in at 49.2, down from September’s 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics.

Investors fled Chinese equities en masse last week after President Xi Jinping broke long-standing precedent to seal a third term in power, fuelling fears that lockdowns and other measures harmful to the economy would continue. AFP

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