Shares of China’s troubled property developer, Country Garden Holdings Co., will be removed from Hong Kong’s Hang Seng Index, according to an announcement made by the stock index compiler on Friday.
Challenging Times for Country Garden
This year, the company’s shares have plummeted by 71%, with more than half of that decline occurring in the most recent quarter. The sharp drop can be attributed to the crisis faced by the debt-ridden real estate industry and the challenges China has encountered in rebooting its economy following COVID lockdowns.
Adding to the industry’s troubles, China Evergrande Group, the country’s second-largest developer, has recently filed for Chapter 15 bankruptcy protection in New York.
The resulting impact of these events has taken a toll on the Hang Seng Index, which has recorded a decline of over 10% in August. Consequently, the index is on track to report its worst monthly performance since October 2022. Country Garden’s financial struggles heavily influenced the index’s downward trajectory. The company failed to meet bondholder payments, leading to the suspension of bond trading. Additionally, Country Garden warned of a potential loss of up to RMB55 billion ($7.62 billion) for the first half of the year. Moody’s Investors Service further downgraded their rating into junk-bond territory.
Changes in the Index Composition
In light of these developments, the Hang Seng Index will replace Country Garden with China vaccine maker Sinopharm Group. This revision will take effect on September 4th.
Furthermore, Country Garden Services Holdings Co. will be removed from the Hang Seng Enterprises Index and replaced by travel services provider Trip.com Group. The changes to this index will also be implemented on September 4th.
Both Country Garden Services and Country Garden are sister companies owned by billionaire Yang Huiyan. Country Garden was co-founded by her father, Yeung Kwok Keung, in 1992.
Chinese regulators have expressed their commitment to resolving debt issues, and it is anticipated that the risks associated with these challenges will gradually be rectified.
