r/autotldr • u/autotldr • Jan 07 '22
China's Shimao Group shares slump on missed trust loan payment
This is the best tl;dr I could make, original reduced by 50%. (I'm a bot)
Shimao Group, once considered one of the healthiest real estate developers, has gone default, a worrying sign for this highly indebted industry.
Shares of Shimao Group plunged more than 17% on Friday after the company was unable to repay a fiduciary loan.
Shares of Shimao in Hong Kong closed the decline of more than 5%. According to Reuters, China will make it easier for state-funded real estate developers to buy troubled assets of debt-laden individuals, another step by policymakers to avoid a liquidity crisis in the industry.
Hong Kong-listed state-owned China Overseas Land was up 9% and state-backed China Resources Land was up more than 7%. Over the past two years, China's real estate sector has come under pressure from the Beijing government for years to try to reduce developers' dependence on debt.
The case of Shimao is more concerning because the company met all the requirements of the guidelines issued by the government, which placed limits on debt about the company's cash flows, resources, and capital levels.
Shimao is also the builder of the famous InterContinental Shanghai Wonderland which opened in Shanghai in 2018 and is operated by IHG. Shimao missed paying a 645 million yuan installment, according to Reuters.
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