Evergrande effect! Chinese property developer Sinic shares tank 87% today, trading halted

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NEW DELHI: Trading was halted in shares of Chinese realtor Sinic Holdings on Monday after its shares crashed 87 per cent in Hong Kong. This is on a day when shares of China’s second biggest realtor Evergrande plunged 11 per cent on the same exchange, as investors feared defaults in the Chinese real estate sector.

Shares of Sinic holdings fell 87 per cent to hit a low of 0.50 Hong Kong cents. Sinic Holdings is an investment holding company, which along with its subsidiaries, is principally engaged in property development and property leasing, according to Reuters.

On September 15, Fitch Ratings had revised the outlook on China-based homebuilder’s Long-Term Issuer Default Rating to Negative, from Stable, but affirmed its rating at ‘B+’.

Fitch had 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. Fitch affirmed the rating based on Sinic’s adequate liquidity, feasible refinancing plan and improving leverage, as measured by net debt (including guarantees to joint ventures (JV) and associates)/adjusted inventory, of 47 per cent in H12021, compared with 52 per cent at end-2020,” Fitch had said.

Fitch in its report said that Sinic’s access to offshore debt capital markets had significantly weakened due to poor investor sentiment. Sinic has three offshore maturities totalling $694 million due in October 2021, January 2022 and June 2022. Its bonds due in 2022 were trading at a 20-25 per cent discount, meaning Sinic may have to repay all three bonds with cash on hand, Fitch said.

“Fitch thinks Sinic’s strategy execution risk has increased, as Sinic slowed land acquisitions in 1H21 and the possibility that it will need to repay all bond maturities will reduce its financial flexibility to replenish land. Fitch does not believe that Sinic can cut land acquisitions for a prolonged period due to its high-churn business model,” the brokerage had said last week.

As of June 30, the group’s cash and bank balances amounted to 19,349.5 million yuan. Excluding other restricted cash and pledged deposits, cash and cash equivalents amounted to 14,037.0 million yuan.

Besides, the group’s net gearing ratio was 50.5 per cent, above the average level in the industry. “The cash short-term debt ratio improved to approximately 1.4 times, the assets to liabilities ratio after excluding receipts is around 73.5 per cent. The group’s weighted average cost of indebtedness as at the end of the period decreased to 8.7 per cent,” Sinic said in a recent release.

Sinic Holdings (Group) Company calls itself a large-scale and comprehensive property developer in the PRC, focusing on the development of residential and commercial properties.

The company develops projects in China’s Jiangxi province. It has expanded its property development business to the Yangtze River Delta Region, the Greater Bay Region and the Central and Western China core cities and other regions with high-growth potential.

Markets in China were closed on Monday and Tuesday on account of public holidays. Hong Kong’s Hang Seng index fell as much as 4 per cent in Monday’s trade, before paring losses a bit to 3.3 per cent.

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