(Yicai Global) Jan. 7 -- Hong Kong-based property developer Shimao Group tumbled nearly 18 percent today after an alleged trust default of CNY645 million (USD101 million). But after falling to the lowest level in five years, the share price slowly rebounded.

Shares of Shimao Group [HK: 0813] plunged sharply after opening this morning, falling 18.3 percent to HKD4.06 (USD0.52), the lowest since February 2017. The company’s share price then bottomed out and rebounded, eventually falling 5.43 percent to close at HKD4.70, with a total market capitalization of about HKD18 billion (USD2.31 billion). In contrast, the Hang Seng Index gained 1.82 percent.

Beijing-based China Credit Trust announced last evening that there was a default on one of its trust products guaranteed by Shimao subsidiaries. The product, launched in September 2020, attracted a total investment of CNY1.4 billion (USD219.68 million). And, Shimao had repaid CNY755 million (USD118.50 million) in part principal and interest, with CNY645 million pending.

This product is actually due in March. However, as Shimao subsidiaries failed to pay obliged provision in cash last December, China Credit Trust required Shimao to repay the remaining funds in advance, resulting in a breach of trust, according to the announcement.

Shimao also released a statement last evening, denying the breach. It pointed out that the trust is mainly for a property project in Foshan, Guangdong Province, where sales are satisfactory. China Credit Trust cannot ask the company to repay the fund in advance due to its own investment problems caused by the previous management.

Shimao revealed that as of the end of last year, the unsold saleable value of the project was about CNY1.3 billion. It is being sold as the firm continues to collect funds for repayment.

Due to the tightening financing environment, many real estate companies in China have fallen into a liquidity crisis since the second half of last year. Shimao has not yet defaulted on its open market debt, but has previously eased its capital pressure by mortgaging its headquarters building and selling some assets.

According to the latest information disclosed by Shimao, as of Dec. 29 last year, the company had completed the disposal of assets worth CNY3.4 billion and received CNY2.3 billion in mainland China. In addition, the disposal of the West Kowloon project in Hong Kong had yielded HKD2.1 billion for the company.

Editors: Dou Shicong, Peter Thomas