Stocks in the Chinese property market have sunk to an almost five-year low after a connected-party acquisition between two units of Shimao Group Holdings intensified corporate governance concerns in a sector already dealing with a major liquidity crisis, reports Caixin.
Shares of Shimao Group and its property-services unit tumbled Tuesday by the most ever as a Bloomberg index of real estate stocks dropped 4.3% to the lowest level since February 2017. The acquisition announced by the developer late Monday “not only implies tight liquidity conditions for Shimao, but is also a corporate governance red flag,” JPMorgan Chase & Co. analysts wrote as they downgraded both stocks.
After a burst of optimism last week that the worst might be over for China’s embattled property sector, investors are once again heading for the exits as signs of funding stress reemerge. Record losses in Shimao Group’s shares and bonds have been particularly unnerving, given that the company was until recently considered among the sector’s strongest players—able to withstand the financing curbs that led to defaults by China Evergrande Group and Kaisa Group Holdings Ltd.