Several financial institutions have significantly reduced the margin financing ratio for New World Development (NWD), amid growing concerns about the Hong Kong developer’s financial stability. According to reports, some lenders have lowered their margin financing ratio for NWD’s stocks and bonds to as low as 30 percent.
The Bank of East Asia (BEA) reportedly slashed its financing ratio from 40 percent to 30 percent, effective December 20, 2024. The Hong Kong Economic Journal first reported this adjustment. In a similar move, CMB International Securities also cut its financing ratio on New World shares to 30 percent.
In addition, a foreign financial institution has removed NWD’s stocks and bonds from its margin financing list, halting purchases of the developer’s bonds for its clients. These actions appear to stem from broader market conditions and heightened risk management concerns.
New World Development, controlled by the family empire of tycoon Henry Cheng Kar-shun, has been a key player in Hong Kong’s credit market, noted for its high leverage. As of the end of 2023, the company’s net debt-to-equity ratio stood at 82.7 percent, significantly higher than that of its competitors. In comparison, Henderson Land Development (41.4 percent) and Sun Hung Kai Properties (21.2 percent) both reported substantially lower debt ratios, according to Bloomberg Intelligence.
These latest moves follow reports that New World Development is currently in discussions with banks to extend the repayment deadlines on some of its bilateral loans.
Despite a slight recovery of 0.77 percent in its stock price yesterday, New World’s shares have suffered a dramatic drop of over 55 percent this year, reflecting investor concerns. This follows a staggering 94 percent decline from the company’s all-time high in 2007.
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