Future Land Development Shares Plunge 14% on Chairman Probe

  • Wang Zhenhua is under investigation by Changzhou Committee
  • Bond prices plunge a record 10 cents to lowest since July

Future Land Development Holdings Ltd. shares plunged by the most since July after the company said its chairman and controlling shareholder Wang Zhenhua was being probed by Changzhou city authorities.

In a statement to the Hong Kong stock exchange Friday, the company said the investigation by the Commission of Discipline Inspection of Changzhou city’s Wujin district was of a personal nature and unrelated to company activities. The shares fell as much as 14 percent in Hong Kong, the biggest intraday decline since July 8, and were down 8 percent at 11:15 a.m.

Wang is the latest executive to be caught up in a sweep of countrywide investigations in the wake of President Xi Jinping’s anti-corruption drive. Chinese developer Kaisa Group Holdings Ltd. last year was caught up in a government probe, and Agile Property Holdings Ltd.’s founder has also come under scrutiny.

“The probe into the Future Land chairman is a good early-year reminder of the political risks that remain in China property,” said Owen Gallimore, credit analyst at Australia & New Zealand Banking Group Ltd. “In the last 15 months we saw probes into the benchmark issuers like Kaisa and Agile. Right now everyone is bullish on property bonds, which is a dangerous sign.”

‘Idiosyncratic Risk’

Future Land’s $350 million 10.25 percent notes due 2019 plunged by a record 10 cents on the dollar to 98.3 cents as of 10:21 a.m in Hong Kong. That’s the lowest since July last year, according to data compiled by Bloomberg.

“Investors should know the idiosyncratic risk of investing in China high yield bonds. No one is safe and the better the company’s financial status, the more it will withstand any negative impact,” said Zhi Wei Feng, credit analyst at Standard Chartered Plc.

Future Land said in Friday’s statement that it doesn’t expect the investigation to have “any impact on the operations and financial positions of the group.”

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