Shares of New World Development, a major property developer in Hong Kong, dropped 14% after forecasting a net loss of up to HK$20 billion ($2.6 billion) for the financial year ending in June. This news sent the shares tumbling to a 21-year low of HK$6.74 in early trading.
The company cited a 23% decrease in core operating profit from continuing operations, along with fair value and impairment losses of up to HK$9.5 billion, as reasons for the expected loss. The impact of interest rate hikes and currency depreciation were also mentioned as contributing factors.
New World's high debt-to-equity ratio and de-leveraging plan have been under scrutiny by investors, especially amid concerns about liquidity in Hong Kong's property market. While the region has not experienced major debt defaults like mainland China, the sluggish residential and commercial property sectors have raised red flags for investors.
In summary, New World Development's significant financial loss and market reaction reflect the challenges facing the Hong Kong property sector. Investors should be cautious about the company's future performance and monitor industry trends closely to protect their investments.