Hong Kong’s stock watchdog yesterday took the rare step of saying China Huishan Dairy Holdings Co (中國輝山乳業) shares cannot resume trading without its approval, leaving stakeholders in limbo.
Huishan’s shares have been frozen since they tumbled 85 percent on March 24.
The Securities & Futures Commission (SFC) will need to give the go-ahead for any resumption of trading, under a rule that allows the market regulator to halt shares when there is evidence of misleading, false or incomplete information.
The SFC invoked the same rule against Hanergy Thin Film Power Group Ltd (漢能薄膜發電集團) in 2015 in the wake of a similar one-day plunge.
The news is the latest challenge for Huishan, which has turned into a poster child for weak corporate governance and the dangers of leverage in China.
Chairman Yang Kai (楊凱) has lost his board of directors, after two executive directors last month joined a flood of departures since the stock’s collapse. Huishan hired Deloitte Advisory of Hong Kong last month to analyze its financial position.
The suspension means shareholders can no longer transfer their shares through over-the-counter trading, said Castor Pang (彭偉新), head of research at Core-Pacific Yamaichi (京華山一) in Hong Kong.
“There’s nothing shareholders can do,” Pang said. “If the SFC is suspending the shares, shareholders would not be able to transfer the title and register with the company registry. The SFC during the last 10 years hasn’t done this very often.”
The sight of multibillion-dollar stocks collapsing in minutes in the territory has deterred investors and raised questions about Hong Kong’s role as one of Asia’s premier trading hubs. Huishan’s plunge wiped out US$4.1 billion of market value in less than 90 minutes.
Hang Fat Ginseng Holdings Co (恒發洋參控股), Hanergy and Tech Pro Technology Development Ltd (德普科技) have all suffered crashes similar to Huishan’s in the past two years. Tech Pro, a provider of LED lighting products, fell 86 percent in 17 minutes in July, while Hang Fat Ginseng plunged 91 percent in an hour in January last year. Eight months before that, solar panel manufacturer Hanergy dropped 47 percent, wiping out US$19 billion of market value in 24 minutes.
Hanergy shares remain halted. The Chinese solar-equipment maker reached a deal with the SFC in January on the requirements and procedures for a resumption of trading.
The agreement came after the SFC said it was seeking court orders to disqualify the company’s four directors and the former chairman, Li Hejun (李河君).
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