Rosalind Evans
Shares of New World Development, one of Hong Kong’s leading property developers, surged by 23% following the sudden resignation of its CEO, Adrian Cheng. Cheng, a founding family member, stepped down to focus on personal commitments and public service. This significant leadership change has brought new energy to the company, with its shares witnessing a sharp uptick.
Resignation Sparks Market Response
The company’s shares, listed on the Hong Kong Stock Exchange, experienced a 23% jump after trading resumed on Friday. New World Development had suspended trading on Thursday, pending an official announcement of Cheng’s departure. The company’s statement emphasized that Cheng would devote more time to “public services and other personal commitments.”
Eric Ma Siu-Cheung, the company’s Chief Operating Officer, has been appointed as the new CEO, marking a historic shift as an outsider takes the helm of the family-run business. This decision surprised many, as family-led companies in Hong Kong typically keep leadership within the family.
Company’s Financial Struggles Amid the Surge
Despite the surge in stock prices, New World Development is facing significant financial challenges. The company recently reported anticipated losses between HK $19 billion ($2.4 billion) and HK $20 billion ($2.6 billion) for the fiscal year ending in June. These losses are attributed to declining sales, investment setbacks, and impairment charges.
New World is not the only developer dealing with such issues, as Hong Kong and mainland China’s property markets continue to struggle. “This clearly shows that corporate governance does matter,” stated Alicia Garcia-Herrero, Chief Economist for Asia Pacific at Natixis. She added, “Having all these tycoons with their preferred sons or daughters, mostly sons, is not the way to run these companies.”
The Broader Economic Impact
Garcia-Herrero noted that this leadership change is timely, as the Chinese government’s recent stimulus measures also influenced the company’s rally. The central bank’s economic intervention, aimed at stabilizing the property market, has triggered a broader rally across Hong Kong and Chinese equities.
China’s top leaders emphasized the urgency of addressing the ongoing real estate market decline during a meeting on Thursday. Their policy initiatives span various areas, including monetary support, employment concerns, and addressing the country’s aging population.
Looking Ahead for New World Development
New World Development’s stock price increase, driven by both internal changes and external economic factors, reflects the growing importance of strong corporate governance in the region. As the company navigates financial losses and the pressures of a weak property market, its ability to adapt to new leadership could determine its future trajectory.
With the appointment of Eric Ma Siu-Cheung, New World Development is positioned to move forward with a fresh perspective. As Alicia Garcia-Herrero highlighted, “When markets are tough, it’s tough to do well unless you have the best management.”
The combination of leadership changes and economic stimulus from China has boosted New World Development, but the road ahead will still be challenging. With high debt levels and market uncertainties, the company must continue making strategic adjustments to maintain investor confidence.
