Troubles mount for Shimao Group as Shanghai exchange asks Chinese developer to explain US$259 million related party deal

The US$259 million sale of a property management business by Shanghai Shimao, a unit of Shimao Group, has caught the attention of the Shanghai Stock Exchange

Shimao Group also plans to cancel transactions of 93 flats at Shanghai’s bustling Lujiazui finance and trade zone because of technical issues

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A man talks on his mobile phone outside a construction site of Shimao Group in Shanghai. Photo: VCG

Published: 7:48pm, 15 Dec 2021

Chinese developer Shimao Group Holdings has found itself in a spot of bother after the Shanghai Stock Exchange raised questions over an asset sale, while investors continue to sell down the stock.

The bourse sent a letter to Shanghai Shimao, a mainland-listed subsidiary of Shimao Group on Tuesday evening, asking it to shed light on the sale of a 1.65 billion yuan (US$259 million) property management business to an affiliated party.

The inquiry came after an announcement by Shimao Group earlier on Tuesday, saying that it would cancel transactions of 93 flats at Shanghai’s bustling Lujiazui finance and trade zone because of technical issues.

The shares and bonds related to Shimao have plunged this week, showing how even the steadiest of China’s property developers has not been spared by the debt woes that have turned publicly traded real estate stocks into some of the worst performers on the stock market. Now, investors are concerned that Shimao, controlled by Shanghai-based magnate Xu Rongmao, also known as Hui Wing-mau, may join China Evergrande Group and Kaisa Group Holdings on a list of companies with heightened risk of default.

A view of Pucheng neighbourhood in Shanghai’s Lujiazui finance and trade zone. Photo: Daniel Ren

“All signs show that Shimao is grappling with cash flow problems,” said Yin Ran, a Shanghai-based angel and property investor. “The inquiry and the cancellation of the transactions are bad news to the developer.”