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Nikkei Markets

Jiayuan's stock plunges in Hong Kong after chairman cuts stake

Mainland Chinese property developer requests trading halt as shares tumble 22%

Hong Kong property developer Jiayuan says its financial situation is "healthy," even though it has lost three-quarters of its market value this month.    © Reuters

HONG KONG (Nikkei Markets) -- Share trading in Hong Kong-listed property developer Jiayuan International Group was halted after its stock dropped more than 22% on Tuesday morning, extending last week's plummet.

Mingyuan Group Investment, a company controlled by Jiayuan's chairman, Shum Tin Ching, last week cut its stake in the mainland Chinese residential property developer to 53.92% from 57.65%, or about 93.62 million shares, according to an exchange filing on Monday.

Jiayuan, which last traded at HK$3.70 on Tuesday, has lost nearly three quarters of its market value this month.

The company's shares tumbled by a record 80.6% to HK$2.52 in heavy trading on Jan. 17, with turnover of 357 million shares. The stock jumped 74.6% to HK$4.40 the following day on even heavier volume of 419.9 million shares after the company confirmed repayment of the outstanding principal and interest on a senior note with total value of $350 million issued last year.

In its exchange filing on Jan. 17, the company had said its financial situation was "healthy" and that its business operations were "normal."

"The board is not aware of any specific reasons for such price and volume movements nor of any information which must be announced and published to avoid a false market in the shares," the company said in that filing.

In its statement to the Stock Exchange of Hong Kong on Tuesday, the developer said it requested the halt "pending the release of an inside information announcement in relation to clarifying recent media reports."

An external public relations official representing Jiayuan said the company planned to make the announcement later to the stock exchange.

In June 2017, Jiayuan informed the stock exchange that Shum, who held 1.35 billion shares, or a 60.8% stake, in the company at the time, had pledged 600 million shares with CCB International Overseas.

Shares of Jiayuan and several other companies plunged last Thursday but partially recovered the next day after they said their operations were running normally, but analysts raised concerns over pledged shares, which are used as collateral for loans. A decline in a stock's price means the value of the collateral falls, too, potentially creating liquidity problems.

-- Benny Kung

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