The real estate and property management sectors continued to fall in the afternoon, with Longfor Group falling more than 19% at one point to close at HK $20.9 per share, the lowest since August 6, 2019. In one day, the market value of Longhu lost more than HK $20 billion.

In addition to Dragon Lake, real estate and property companies have also recorded a sharp decline, such as Country Garden Holdings fell more than 7%, Greentown China, Xuhui Holdings, time China once fell more than 6%, China Resources Mixc Lifestyle Services fell more than 4%.

On the news, UBS issued a report measuring the cash consumption rates of four major mainland property companies, Country Garden Holdings, Vanke, Longhu and Xuhui, based on idle cash, and assessing how many contract sales are needed to make ends meet. All four real estate companies generated negative free cash flow in the first half of 2022, equivalent to 11 per cent of the idle cash balance at the end of 2021, according to UBS.

Among them, the negative cash flow generated by Longhu in the first half of 2022 is equivalent to 7% of its total cash (including restrictions) and 11% of its idle cash balance by the end of 2021, respectively. UBS estimates that the monthly contract sales of Country Garden Holdings, Longhu and Xuhui need to increase by 11% in the first half of 2022 compared with the first half of 2022 to restore cash flow balance, of which Longhu needs to achieve 13% growth.

As a result, UBS cut the earnings and target prices of some inner housing stocks, downgrading Country Garden Holdings and Longhu to "neutral" and lowering their target prices to HK $2.70 and HK $25.70, respectively. The report reiterated Xuhui's "neutral" rating and was optimistic about Vanke's better cash flow and its semi-state-owned enterprise status.

In addition to UBS downgrading its target price and rating, there are also market rumors that Longhu commercial tickets are overdue.

As a representative of private real estate enterprises, Longhu is famous for its "all-good" development in the industry. although there are frequent explosions in real estate enterprises, Longhu has conveyed a sound image to the public over the past year. This cliff fall in share prices is considered to be the last fortress of private real estate enterprises to collapse, which not only aroused great concern in the real estate industry, but also went straight to the hot search.

In a conference call held at 6 p.m. on the 10th, Longfor Group Chairman Wu Yajun, Vice Chairman Shao Mingxiao, CEO Chen Xuping and CFO Zhao Yizhi went online to respond to market concerns with the lineup of senior executives at the annual results conference.

In response to the cash flow problem, Longhu responded that it is very concerned about the safety of cash flow and will precipitate some funds to invest in shopping malls every year, which is effective in the current industry. With regard to debt, as it is currently in a quiet period, the specific figures cannot be told, but by the end of the year, all debts have been paid off, and there are no outstanding hard debts. In the second half of the year, syndicated loans due next year may be repaid voluntarily, with short-term debts accounting for about 10%.

In response to the sharp fall in stock prices today, Wu Yajun said that he did not care too much, it was caused by market panic, there was nothing wrong with the enterprise at all, and the internal and external debt structure of Longhu was very good. Now is not to look at the risk, but to look at the opportunity, it is time to explode, now is the darkest time in the industry, but we should look at the bright side. "the country has been trying to get the industry back on track, and companies that used to be highly leveraged have paid the price. There will be no flooding. The policy will be gradually introduced, and after the industry is cleared, there will always be opportunities in Longhu. "

In response to rumors of overdue commercial tickets, the Shanghai Securities Exchange issued a notice on the evening of Aug. 10, saying that recently, Longfor Group Holdings Co., Ltd. has a large number of records of "overdue" commercial tickets. It has been verified that as of August 10, 2022, Longfor Group Holdings Co., Ltd. has no record of breach of contract and refusal of payment, and the relevant rumors are not true.