China Aoyuan Slips On Creditors Payment Notices; Short-term pressure on the stock price likely

By Justina Lee

The shares of China Aoyuan Group Ltd. fell during the morning session as sentiment was weighed by news that the developer had received notices from creditors demanding payment due to recent downgrades by rating agencies.

Guangzhou-based China Aoyuan slipped as much as 17% to its lowest level in five years at HK $ 1.66 in mid-morning trading. It is also its biggest intraday percentage drop since September 2017. The stock is on track to close at its lowest level since October 2016.

The company, which is involved in real estate development, leasing and hotel operations in mainland China, said Thursday evening that there was no guarantee it would be able to meet its financial obligations, and is now working with his advisers on a “remediation plan”.

“The reasons for such a difficult situation [are] due to its high exposure to non-bank financing (bonds, fiduciary loans, ABS, etc.), which are hardly available during the last 6 to 9 months ”, explains CGS-CIMB. reduced its target price to HK $ 1.60 from HK $ 7.70.

“Expect Aoyuan to undergo a restructuring ahead, which could continue to put pressure on its share price,” notes CGS-CIMB.

Beijing’s efforts to control the growing debts of developers, falling home sales and the Evergrande group crisis have shaken investor confidence. These have driven down bond prices and closed the market to new offshore debt issuance, making it even more difficult for real estate companies to raise the cash they need to pay off upcoming debts.

Write to Justina Lee at [email protected]

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Elaine R. Knight