Signage at the New World Tower, which houses the headquarters of New World Development Co. in Hong Kong, China, on Thursday, September 26, 2024. New World Developmen suspended trading of its shares in Hong Kong on Thursday morning.
Bloomberg | Bloomberg | Getty Images
Shares in New World Development in Hong Kong rose sharply following the resignation of Adrian Cheng, a member of the founding family.
The Hong Kong-listed shares of the major development company traded 23% higher after trading resumed on Friday.
The company said in a statement that it suspended trading on Thursday “pending the release of announcements” following the departure of Cheng, who will devote more time to “public service and other personal commitments.”
In his place, Chief Operating Officer Eric Ma Siu-Cheung has been named the new CEO, the company announced. This is a rare move for an outsider to run the family business in Hong Kong.
In a filing last month, the developer said it would book a loss attributable to shareholders of 19 billion to 20 billion Hong Kong dollars ($2.6 billion) for the fiscal year ending in June, hurt by declining sales and Investment losses and impairment losses.
The New World's woes come as real estate woes continue to plague Hong Kong and mainland China. The project developer's statements show that it is also burdened by high levels of debt.
“This clearly shows that corporate governance is important. Having all these tycoons with their favored sons or daughters, mostly sons, is not really the way to run these companies,” said Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis. an investment banking firm, said CNBC.
“And I think now the business tycoons in Asia, particularly the business tycoons in Hong Kong, have realized that it's really hard to succeed in difficult markets if you don't have the best management,” she added.
The economist added that the main drivers of the rise in New World shares were also due to the stimulus measures from China.
The rally comes amid a broader rally in Hong Kong and Chinese stocks in recent sessions after China's central bank announced a series of stimulus measures on Tuesday.
China's top leaders also said Thursday that authorities must work to halt the decline in the real estate market. A readout from their meeting showed the leaders calling for stronger fiscal and monetary support, touching on a range of issues including employment and the aging population.