China Property Plunge Worsens as Shimao Deal Raises ‘Red Flag’

Shimao Group has attributed the selloff to unspecified “rumors,” but the company’s sparse public comments on its financial health have only added to speculation that it faces a cash crunch

(Bloomberg) — Chinese property stocks sank to a nearly five-year low after a deal between two units of Shimao Group Holdings Ltd. heightened corporate governance concerns in an industry already grappling with a liquidity crisis.

Shares of Shimao Group and its property-services unit tumbled Tuesday by the most ever as a Bloomberg index of real estate stocks dropped 4.3% to the lowest level since February 2017. A connected-party acquisition announced by the developer late Monday “not only implies tight liquidity conditions for Shimao, but is also a corporate governance red flag,” JPMorgan Chase & Co. analysts wrote as they downgraded both stocks.

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