HONG KONG (REUTERS) - Shares of Sunac China and its services unit sank on Monday (Nov 15) after the Chinese developer raised a total of HK$7.4 billion (S$1.3 billion) by issuing new shares and selling a stake in Sunac Services.
Sunac China dropped as much as 9.2 per cent to HK$15.48 in early trading, after issuing 335 million shares, or 6.7 per cent of total shares including the fresh placement, at HK$15.18 apiece, raising HK$5.1 billion.
Sunac China also sold a 5.1 per cent 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 per cent to HK$14.28.
The company said in a filing on Sunday it plans to use half of the proceeds to repay loans.
Sunac China chairman Sun Hongbin has provided an interest-free loan of US$450 million (S$608 million) to the company to show his long-term confidence and commitment, according to the filing.
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 China 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 per cent after the share placement and sale of the stake in its services unit.