Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

DOW JONES INDUSTRIAL

(DJI)
Real-time USA  -  05:15 2022-09-29 pm EDT
29225.61 PTS   -1.54%
Pre-market
-0.19%
29170.63 PTS
09:13aFed Vice Chair Brainard Says FOMC Will Proceed 'Deliberately,' Remain Data-Dependent
MT
09:12aFed Vice Chair Brainard Says FOMC Committed to Avoiding Easing 'Prematurely', Sees Uncertainty About Final Policy Range
MT
09:09aFed Vice Chair Brainard Says Monetary Policy Will 'Need to be Restrictive for Some Time' to Ensure that Inflation is Falling
MT
SummaryQuotesChartsNewsHeatmapComponents 
SummaryMost relevantAll NewsOther languagesNews of the index componentsMarketScreener Strategies

China property developers' woes cast shadow over management units

08/10/2022 | 12:04am EDT
The logo of China Evergrande is seen at China Evergrande Centre in Hong Kong

HONG KONG (Reuters) - China's real estate crisis is casting a darkening cloud over governance and financial prospects of once highly valued property management companies, triggering a rout in their shares and making investors cautious.

Already battered share prices have fallen a further 7% this month as investors have reacted to the latest instances of such companies lending support to cash-strapped developer parents.

"The capital market has lost confidence in some of the property management companies, even in those companies that have not seen misuse of funds by their parents," said UBS's head of China and Hong Kong property research, John Lam.

In one of the latest two cases that have unnerved investors, China Evergrande Group said on July 22 an internal probe had found that $2 billion of funds held by subsidiary Evergrande Property Services had been pledged to guarantee financing by the group for debt repayment.

In the end, banks seized the money, cleaning out much of the unit's cash. China Evergrande Group, the world's most indebted property developer, has been at the centre of China's property crisis, in which many such companies have defaulted as a result of government moves to deleverage the sector.

Then on Aug. 1 shares in property manager Jinke Smart Services Group dropped 37% after it said it would lend up to $222.3 million to parent Jinke Property.

As the crisis developed last year, some property management units issued and sold shares to raise funds that were passed back to parents.

Also, property manager Shimao Services Holdings bought a business from developer parent Shimao Group at an unusually high price.

Such doings have not pleased investors. Since mid-2021, valuations for management subsidiaries of distressed developers have plunged from a peak of 25 times earnings to just five to six times, according to Lam, who added that those still above this level could come under downward pressure.

Falls continue. Since the announcement by Jinke Smart Services, the Hang Seng sub-index that tracks major mainland property management companies has lost 7%, while the broader Hang Seng Index is down less than 1%%.

RELIANCE ON PARENTS

William Shek, the chief distribution officer of Zeal Asset Management Ltd, a Hong Kong-based hedge-fund manager, said his firm had turned cautious on this sector since the beginning of the property crisis.

"Subsidiaries are unlikely to be shielded from risks if their parent companies get into trouble," Shek said.

Another concern is the dependability of property managers' profits. Since so much of their business was providing management services to parents, revenue was limited by how much parents would or could pay, senior executives of two developers told Reuters.

Analysts noted property management companies had posted a surge in impairment provisions for receivables in the second half of last year. The trend is expected to worsen in results for the first half of 2022, when more developers were running out of cash.

Analysts are less concerned about units of state-owned developers, which have good liquidity positions and are subject to strict governance requirements.

But state-owned China Resources Mixc Lifestyle Services was targeted late last month by GMT Research, which estimated at least 55% of the firm's profits came from related parties, including parent China Resource Land.

GMT said the property services unit was trading at 31 times estimated earnings for 2022 but China Resources Land would have little incentive to support its profitability.

China Resources Mixc Lifestyle Services said in an emailed response to Reuters that its service pricing was transparent and reasonable. Its market-leading valuation was driven by its market development capability, among other things, it added.

($1 = 134.7300 yen)

(Editing by Sumeet Chatterjee and Bradley Perrett)

By Clare Jim and Xie Yu


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
CHINA EVERGRANDE GROUP 8.55% 1.65 Delayed Quote.3.77%
CHINA RESOURCES LAND LIMITED 1.98% 30.9 Delayed Quote.-7.62%
CHINA RESOURCES MIXC LIFESTYLE SERVICES LIMITED 2.20% 30.15 Delayed Quote.-17.06%
DOW JONES INDUSTRIAL -1.54% 29225.61 Real-time Quote.-18.31%
EVERGRANDE PROPERTY SERVICES GROUP LIMITED 2.68% 2.3 Delayed Quote.-12.88%
JINKE PROPERTY GROUP CO., LTD. -4.17% 2.07 End-of-day quote.-53.79%
JINKE SMART SERVICES GROUP CO., LTD. -0.50% 11.9 Delayed Quote.-64.95%
SHIMAO GROUP HOLDINGS LIMITED -2.21% 4.42 Delayed Quote.-13.33%
SHIMAO SERVICES HOLDINGS LIMITED -1.76% 1.67 Delayed Quote.-69.19%
THE LIFESTYLE GROUP S.P.A. -3.64% 0.0053 Delayed Quote.-98.46%
All news about DOW JONES INDUSTRIAL
09:13aFed Vice Chair Brainard Says FOMC Will Proceed 'Deliberately,' Remain Data-Dependent
MT
09:12aFed Vice Chair Brainard Says FOMC Committed to Avoiding Easing 'Prematurely', Sees Unce..
MT
09:09aFed Vice Chair Brainard Says Monetary Policy Will 'Need to be Restrictive for Some Time..
MT
08:49aHome Price Appreciation Continued to Slow Down in August Due to High Inflation, Mortgag..
MT
08:44aAugust US PCE Prices Rise More Than Expected; Income Higher, Spending Rebounds
MT
08:34aAugust US Core PCE Price Index Rises 0.6% Vs. Expected 0.5% Gain, Prior Flat Reading
MT
08:33aAugust US PCE Price Index Rises 0.3% Vs. Expected 0.1% Gain, Prior 0.1% Decline
MT
08:33aAugust US Real Personal Spending Rises 0.1%, As Expected, Prior Revised 0.1% Decline
MT
08:32aAugust US Personal Spending Rises 0.4% Vs. Expected 0.2% Gain, Prior 0.2% Decline
MT
08:31aAugust US Personal Income Rises 0.3%, As Expected, Prior 0.3% Increase
MT
More news
News of the index components DOW JONES INDUSTRIAL
09:15aTelsey Advisory Adjusts Nike's Price Target to $110 from $125, Maintains Outperform Rat..
MT
09:14aSector Update: Consumer Stocks Mixed Pre-Bell Friday
MT
09:13aRBC Cuts Price Target on Nike to $115 From $125, Noting Lower-Than-Expected Fiscal Q1 G..
MT
09:03aMorgan Stanley Cuts Price Target on Nike to $120 From $129, Sees More Attractive Opport..
MT
08:59aInsider Sell: Salesforce
MT
08:51aSector Update: Consumer
MT
08:51aDeutsche Bank Adjusts Nike Price Target to $99 From $123, Maintains Buy Rating
MT
More news
Chart DOW JONES INDUSTRIAL
Duration : Period :
Dow Jones Industrial Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends DOW JONES INDUSTRIAL
Short TermMid-TermLong Term
TrendsBearishBearishNeutral
Rankings DOW JONES INDUSTRIAL
THE TRAVELERS COMPANIES 156.49 Real-time Estimate Quote.1.17%
MICROSOFT CORPORATION 239.5 Real-time Estimate Quote.0.84%
3M COMPANY 112.895 Real-time Estimate Quote.0.53%
VERIZON COMMUNICATIONS 38.83 Real-time Estimate Quote.0.49%
THE COCA-COLA COMPANY 56.76 Real-time Estimate Quote.0.34%
APPLE INC. 141.315 Real-time Estimate Quote.-0.82%
AMGEN INC. 228.41 Delayed Quote.-1.11%
HONEYWELL INTERNATIONAL INC. 170.07 Delayed Quote.-2.16%
WALGREENS BOOTS ALLIANCE, INC. 31.55 Delayed Quote.-4.97%
NIKE, INC. 83.025 Real-time Estimate Quote.-12.91%
Heatmap :