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China Developer Sunac, Services Unit Plunge On Stake Sale

Sunac dropped 9% to HK$15.48 in early trading, after issuing 335m shares, or 6.7% of total shares including a fresh placement, at HK$15.18 apiece, raising HK$5.1 billion


The China property crisis may trigger social instability if mishandled, says Bank of America
BofA estimated that 2.4 million households or 7.3 million people were affected by unfinished projects from 2020-21 and that the sector would remain as a major drag on growth in coming quarters. Photo: Reuters.

 

Shares of Sunac China and its services unit dropped on Monday after the Chinese developer raised a total of HK$7.4 billion ($949.70 million) by issuing new shares and selling a stake in Sunac Services.

Sunac dropped 11.5% to HK$15.08 at the close of trading in Hong Kong, after issuing 335 million shares, or 6.7% of total shares including the fresh placement, at HK$15.18 apiece, raising HK$5.1 billion.

Sunac also sold a 5.1% stake in Sunac Services at HK$14.75 per share to raise HK$2.33 billion. The share price of Sunac Services plunged as much as 13.8% to HK$14.28.

The company said in a filing on Sunday it plans to use half of the proceeds to repay loans.

Sunac chairman Sun Hongbin has provided an interest-free loan of $450 million to the company to show his long-term confidence and commitment, according to the filing.

 

Tight Liquidity

Liquidity in the China property sector has become very tight in the past few months after unprecedented waves of policy tightening and investor worries about wider contagion from China Evergrande Group, the world’s most indebted developer, which is teetering on the brink of collapse.

Brokerage Jefferies said in a note it was “a right move” for Sunac to gather sufficient funding in order to solve its short-term tight liquidity, which was driven by weak sales and refinancing difficulty.

It expected the developer’s net gearing ratio to decrease slightly lower by 2 basis points to 85% after the share placement and sale of the stake in its services unit.

The Hang Seng Index was flat.

 

  • Reuters with additional editing by Kevin Hamlin

This report was updated with new information on November 15.

 

 

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Kevin Hamlin

Kevin Hamlin is a financial journalist with more than 40 years of experience covering Asia. Before joining Asia Financial, Kevin worked for Bloomberg News, spending 12 years as Senior China Economy Reporter in Beijing. Prior to that, he was Asia Bureau Chief of Institutional Investor for ten years.

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