China’s Hywin hits record low over missed payments amid property woes

BEIJING/NEW YORK (Reuters) -Shares of Chinese wealth manager Hywin Holdings Ltd. fell by nearly 18% to a record low on Friday after it said that it has been unable to promptly fulfill client redemption requests.

While Hywin is a small player with total assets of 2.37 billion yuan ($328 million) as of the end of June, company documents showed, its troubles show how China’s faltering property sector is causing strain throughout the financial system.

Hywin, whose products are primarily invested into real estate, announced on Thursday that asset managers for some products the company distributes were unable to reach an agreement with “relevant clients” to defer their redemption requests.

Failure to resolve these redemption issues could “materially and adversely” impair its reputation, client relationship, business, financial condition and prospects, Hywin said.

Hywin’s shares dropped to as low as $2.28, its lowest level on record, after plunging by more than 50% in the last two trading sessions weighed down by the news. The stock is now down nearly 60% year-to-date. It went public on the Nasdaq for $10 in March 2021.

“Hywin could be yet another falling domino in the Chinese property chain,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank. “It serves as a stark reminder of the fragile health of the Chinese property market, despite the government’s efforts to slow down the hemorrhage.”

The debt crisis emanating from China’s beleaguered property sector is one of the main headwinds to the country’s economic growth, and it has led to downfall of some of the biggest real estate developers including Evergrande Group and Country Garden. Defaults by some of these developers since late 2021 have impeded economic growth and rattled global markets.

Hywin’s announcement on Thursday followed market chatter on social media that the firm missed payments on some investment products. The company said it has formed a special investigation committee comprised of senior management to oversee an internal investigation to the payment delays. It did not immediately respond to a Reuters’ request for comment.

Hywin derives most of its revenues from distributing real estate products, including those investing in projects from Evergrande and Sunac China Holdings Ltd.. Net revenue from real estate products accounted for 88.8% of its wealth management services in the year to June 30, 2020, according to data from the company’s latest available prospectus.

Hywin is the latest Chinese financial services provider to report redemption failures on its products. In July, Zhongrong International Trust Co, a trust firm controlled by leading Chinese wealth manager Zhongzhi Enterprise Group, missed payments on dozens of investment products.

“The news about Hywin clearly aligns with the challenges faced by other struggling property firms,” Ozkardeskaya said. “Nevertheless, global repercussions will likely remain limited as international investors have largely divested and many investors know that the situation may get worse before it gets better,” she added.

(Reporting by Ziyi Tang, Ryan Woo, Shubham Batra, Bansari Mayur Kamdar, and Chibuike Oguh; Editing by Sharon Singleton, Mrigank Dhaniwala and Josie Kao)