Shimao shares, bonds tumble on fresh signs of liquidity stress

Shimao's Hong Kong-listed shares slumped more than 9 per cent in morning trading to a one-month low. PHOTO: REUTERS

SHANGHAI (REUTERS) - Shares and bonds of Shimao Group tumbled on Thursday (Feb 24), after a trustee said roughly US$170 million (S$230 million) worth of asset-backed notes guaranteed by the Chinese developer may not be redeemed on maturity.

Investor confidence was also hit by a fresh Moody's downgrade of Shimao's rating, highlighting the debt travails bedevilling some bloated developers, despite targeted policy easing by Beijing to prevent a hard landing of the industry.

Shimao's Hong Kong-listed shares slumped more than 9 per cent in morning trading to a one-month low.

A Shimao bond tumbled 22 per cent in Shanghai, the biggest decliner in the city's exchange market for corporate bonds. Several other Shanghai-traded bonds issued by Shimao fell more than 6 per cent.

Some 1.1 billion yuan of asset-back notes guaranteed by Shimao may not be redeemed when they mature next month, trustee Yunnan International Trust said in a filing that was disclosed on Wednesday.

Also on Wednesday, global rating agency Moody's downgraded Shimao's corporate family rating again, citing the firm's heightened liquidity risks over the next six to 12 months.

Moody's also changed Shimao's outlook to negative from ratings under review, as the developer faces large upcoming debt maturities.

China stepped up its deleveraging campaign last year against heavily indebted developers, driving the industry into a liquidity crisis that led to defaults by China Evergrande Group and a slew of smaller rivals.

Although China has taken a series of measures in recent months to revive confidence in a sector suffering from falling prices and slumping sales, there is no sign that Beijing will reverse its deleveraging policies.

China's Housing Minister Wang Menghui pledged on Thursday to keep the real estate market stable this year and ensure "genuine demand" for homes is met.

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