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HONG KONG: Shares of Chinese property developer Evergrande fell by as much as 18% on Friday, Sept 30 in its biggest plunge ever, hit by fears that its September sales could come in worse than expected and continued worries about high debt levels.
Other property developers also fell, including Greentown China Holdings Ltd and Hopson Development Holdings Ltd, which both shed more than 3% compared to a 2% decline in the benchmark Hang Seng Index.
By the midday break, shares of Evergrande were down 15.3% at HK$2.49 (RM1.02).
"It's going to be very important to look at their contract sales from September onwards," said Ricky Mui, a Hong Kong-based analyst at CLSA.
"Sentiment is very weak, and there is growing concern about their financing ability, especially for the rest of this year."
Real estate developers in China are required to report their contract sales on a monthly basis. Evergrande will release its September numbers in early October, and has previously said it is targeting total contract sales of 70 billion yuan (RM34.98 billion) this year.
Beijing has been trying to cool the country's overheated property sector in the past two years, and the efforts are beginning to pay off as housing inflation begin to show signs of peaking and home prices in many major cities remain flat.
Developers are likely to suffer a "severe liquidity strain" and "struggle to meet their short-term obligations" if sales decline by 30% in 2012, ratings agency Standard and Poor's said on Tuesday.
Evergrande said in a statement posted on the Hong Kong bourse that it had noted the rise in trading volume and fluctuations in the price of its shares, and said that it was not aware of any reasons for these changes.
Evergrande shares have fallen by almost a third since Sept 21, when Reuters first reported that China's banking regulator had ordered trust firms to report their exposure to the parent and units of Greentown China.
Weakened sales have raised hopes that the Chinese property sector may soon undergo some form of industry consolidation. There are an estimated 80,000 real estate developers in China, with the top three accounting for less than 5% of the total market.
Credit Suisse dismissed such hopes in a research note, saying that it expects the market to stay fragmented even if there are acquisition opportunities available.
"We expect China's property market, like all other continental markets, to stay localised and fragmented throughout multiple cycles," analyst Du Jinsong wrote in the note. — Reuters
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