HONG KONG — In a remarkable turn of events, shares of New World Development, one of Hong Kong’s major property developers, surged by an impressive 23% after the unexpected resignation of CEO Adrian Cheng. This significant stock price jump came as trading resumed on Friday, following a temporary halt on Thursday in anticipation of the announcement.
Adrian Cheng, a key member of the founding family, cited a desire to dedicate more time to public service and personal commitments as the reason for his departure. The company has since appointed Eric Ma Siu-Cheung, the former Chief Operating Officer, as its new CEO—a notable move that breaks tradition by bringing in an outsider to lead the family-run business.
Despite this positive market reaction, New World Development faces considerable challenges, including an anticipated financial loss of HK$19 billion to HK$20 billion (approximately $2.4 billion to $2.6 billion) for the fiscal year ending in June. This projected loss is attributed to declining sales, investment losses, and high debt levels, reflecting the broader struggles of the real estate sector in both Hong Kong and mainland China.
Alicia Garcia-Herrero, the Chief Economist for Asia Pacific at Natixis, highlighted the critical importance of corporate governance in navigating today’s tough market conditions. She noted that the departure of Cheng could signify a shift in strategy towards stronger management practices, especially given the challenging economic landscape. Garcia-Herrero stated, “When markets are tough, it’s really hard to do well, unless you have the best management.”
The recent rally in New World Development’s stock is also tied to renewed investor optimism following the Chinese government’s announcement of stimulus measures aimed at reviving the struggling real estate market. On Thursday, top Chinese leaders emphasized the need for enhanced fiscal and monetary support to stabilize the economy, further bolstering market confidence. New World Development (NWD), one of Hong Kong’s leading property developers, saw its shares surge by an impressive 23% following the resignation of CEO Adrian Cheng. This notable increase occurred after trading resumed, having been suspended on Thursday amid news of Cheng’s departure, which he cited was to focus on public service and personal commitments.
Cheng’s resignation marks a significant transition for the company, as he has been a central figure in NWD since joining in 2007. His tenure has been marked by his efforts to merge art and commerce, exemplified by his founding of the K11 Art Foundation and the promotion of contemporary art within NWD’s properties. Under Cheng’s leadership, NWD faced substantial financial challenges, with projections indicating a staggering loss of up to HK$20 billion (approximately $2.6 billion) for the last financial year. This financial strain is reflective of broader troubles in Hong Kong’s property market, which have been exacerbated by high debt levels and declining sales. Cheng emphasized that his departure was a personal decision made with the support of his father, Henry Cheng, the company’s chairman. He expressed a desire to dedicate more time to cultural and public service endeavors, hinting at a continued influence in the arts, despite stepping back from daily management. As the company restructures under new leadership, the market response suggests a hopeful outlook, buoyed also by recent stimulus measures from China aimed at reviving the property sector.
Adrian Cheng, the CEO of Hong Kong’s New World Development, recently announced his resignation, which triggered a remarkable 23% surge in the company’s shares upon resumption of trading. This decision comes as Cheng seeks to dedicate more time to public service and personal commitments, while remaining with the company as a non-executive director and vice-chairman
Cheng’s departure follows a turbulent financial period for New World Development, which reported a staggering loss of approximately HK$19.7 billion (around $2.5 billion) for the fiscal year. The company’s financial woes have been attributed to a significant drop in revenue and a sharp decline in property valuations, exacerbated by high debt levels . In light of these challenges, the firm has appointed Eric Ma Siu-Cheung, a former government minister and COO, as the new CEO—a move seen as a departure from the usual family succession in leadership roles
Cheng has been a prominent figure in Hong Kong’s cultural and business landscape, known for his contributions to the arts and his development of the K11 brand, which merges retail with cultural experiences. His decision to step down was reportedly made with the full support of his father, Henry Cheng, the company’s chairman, highlighting a shift in leadership dynamics at New World Development.
