Gemdale, a Chinese real estate company, witnessed a sharp decline in its stocks and bonds on Tuesday following the resignation of its chairman. Concerns about the ongoing debt crisis in China’s real estate sector have driven investors to act cautiously.
The company announced the resignation of its chairman, Ling Ke, on Monday evening, citing health reasons. Ling would be succeeded by the company’s president, Huang Juncan. While the company did not provide further details about the health reasons behind the resignation, a separate company statement referred to it as a normal transfer of management responsibilities with no significant impact on the firm’s operations.
However, in light of broader concerns about debt issues in China’s property sector, investors began selling off the stock. As a result, the stock price plummeted by the daily 10% limit during afternoon trading in Shanghai. Moreover, Gemdale’s onshore bonds due in 2024, 2025, and 2026 experienced significant drops of 25%, 21%, and 20%, respectively, leading to their suspension from trade.
Ting Meng, a credit analyst at ANZ Bank China, noted that investors are apprehensive about Gemdale’s financial condition due to the unexpected resignation of its chairman.
According to LSEG data, Gemdale holds a total debt of ¥21.1 billion ($2.88 billion) in the form of bonds set to mature by the end of 2024. The company’s $480 million dollar bonds, scheduled to mature next August, were reportedly being bid at approximately 20 cents against the dollar, nearly half of their value earlier this month, as reported by traders.
Gemdale had not responded to a request for comment from Reuters at the time of this report. The company ranked as the 8th largest developer in China last year, according to the private research firm China Real Estate Information Corp. Its annual report published in April indicated sales of ¥221.8 billion ($30.3 billion) and stable financial fundamentals.
(Note: The exchange rate used is $1 = 7.3149 Chinese yuan.)