Legislative Updates News
- Regulators punishing high-flyer Hangxiao
Date: 15-May-2007 Sources: (Shenzhen Daily)
REGULATORS are punishing Zhejiang Hangxiao Steel Structure Co., one of China's hottest stocks this year, for improper disclosure of information that caused its stock price to more than quadruple.
The China Securities Regulatory Commission (CSRC) is fining Hangxiao 400,000 yuan (US$52,000) and five of its executives between 10,000 yuan and 20,000 yuan each, the Shanghai-listed company said in a statement yesterday.
The Shanghai Stock Exchange has issued a notice publicly criticizing chairman Shan Yinmu, board member Pan Jinshui and president Zhou Jinfa for irregularities in information disclosure, Hangxiao added.
'Our company sincerely apologizes to investors,'it said.
A spectacular leap in Hangxiao's share price this year and controversy over how it released the information that triggered the rise, have underlined concern about poor disclosure in China's booming stock market.
Hangxiao said it won contracts worth 34.4 billion yuan (US$4.46 billion) for construction and engineering work on public housing in Angola over five years.
If the contracts are completed, they will give the small company a huge boost. It had sales of just 1.9 billion yuan last year.
The CSRC found that Hangxiao's Shan improperly revealed at a company employee meeting Feb. 12 that he was talking with Hong Kong-registered China International Fund about major overseas contracts, while the firm made no public announcement in line with securities rules.
Hangxiao's Shanghai-listed shares then surged their 10 percent daily limit for three days until Feb. 15, when the firm made an announcement about possible overseas contracts. During that period, the exchange asked Hangxiao whether it had any important information to release and the company said it did not.
When Hangxiao formally announced the contracts March 13, it failed to reveal major risks related to the contracts and did not itself know details of the Angola project, the CSRC said.
The Angola deal may not be fully completed because there are no default clauses in the contract, Hangxiao Steel said April 2. The contract, which includes supplies of steel structures, door and window frames, may not contribute to earnings for two years, it said in a March 13 statement.
Among other irregularities, company officials misled investors by saying in early April that regulatory investigations had nearly concluded and that no problems had been found, while in fact the investigations had just started, the CSRC added.
Hangxiao's shares have tumbled from an intra-day high of 19.70 yuan in mid-April to close at 13.53 yuan Thursday last week amid media reports about irregularities involving the Angola deal. But the stock, which was suspended Friday, is still far above the firm's share price of less than 4 yuan in early February.
Domestic media have reported that some institutional investors learned of Hangxiao's contracts through informal channels, bought the stock and then dumped it before it tumbled, saddling retail investors, who were less well-informed and had bought at high prices, with losses.
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