Mystery sell-offs test Hong Kong at crucial point

Goldin Financial Holdings

21/05/2015 07:06

(The author is a Reuters Breakingviews columnist. The opinions 
expressed are his own.) 
    By Peter Thal Larsen 
    HONG KONG, May 21 (Reuters Breakingviews) - Mysterious share 
movements are testing Hong Kong at a crucial point. Chinese 
solar company Hanergy's  0566.HK  valued soared to $40 billion 
in six months, then halved in a morning. Two other once-hot 
stocks have also suddenly plunged. The gyrations challenge Hong 
Kong's claim to offer investors a transparent and orderly 
gateway to China. 
    Hanergy Thin Film Power has bewildered investors for a 
while. The group's technology is unproven and it earns most of 
its revenue from its unlisted Chinese parent. Nevertheless, the 
shares quadrupled in six months, by some measures making 
chairman Li Hejun China's richest man. 
    The ascent ended on May 20, when the shares crashed before 
Hanergy requested their suspension. The sudden fall is as 
baffling as the rise. The Securities and Futures Commission is 
investigating alleged market manipulation, a source told 
Reuters. 
    Whatever the explanation, the loss of confidence has proved 
infectious. Shares in Goldin Financial  0530.HK  and Goldin 
Properties  0283.HK , whose value had risen six-fold since the 
beginning of December, fell sharply on May 21. The companies, 
both controlled by polo-loving tycoon Pan Sutong, said they had 
no explanation for the collapse. 
    Hong Kong investors are no stranger to stock market hype, 
especially as mainland China's renewed exuberance for equities 
has spread to the former British colony. Thin free floats also 
make shares more prone to gyrations: in March, the SFC warned 
that Pan and 19 other shareholders control all but 1.4 percent 
of Goldin Financial. Even so, such violent movements are unusual 
for companies this big. By market capitalisation, the sell-offs 
at Hanergy and Goldin Financial are the equivalent of Yahoo 
 YHOO.O  or American Airlines  AAL.O  suddenly halving in value. 
    The episode comes at a critical moment. Hong Kong's stock 
exchange operator has opened a link allowing foreign investors 
to buy shares in Shanghai, and a planned connection with 
Shenzhen is likely to go live soon. Yet to lure wary foreign 
investors, Hong Kong must show it can enforce values of openness 
and integrity. Hanergy's rollercoaster ride suggests standards 
are slipping. 
 
       
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    CONTEXT NEWS 
    - China's Hanergy Thin Film Power Group is under 
investigation by Hong Kong's market watchdog, a source told 
Reuters on May 20, after the company lost almost half its market 
value in 24 minutes. Trading was suspended after the plunge in 
the share price of the company, which manufactures solar 
panel-making equipment. 
    - On the morning of May 21 shares in Goldin Financial and 
Goldin Properties, whose value has also soared in recent months, 
dropped sharply without explanation. By midday in Hong Kong, 
shares in Goldin Financial had fallen 57 percent to HK$13.1, 
wiping almost $17 billion off the company's market value. Shares 
in the smaller Goldin Properties had fallen 45 percent to 
HK$13.3. 
    - A source familiar with the situation told Reuters that 
Hanergy had been under investigation for several weeks by Hong 
Kong's Securities and Futures Commission for alleged market 
manipulation. A spokesman for the SFC declined to comment, and 
Hanergy officials were not available to comment. 
    - Hanergy shares, which have risen from HK$1.94 at the 
beginning of December, closed at HK$7.37 on May 19, valuing the 
company at HK$307 billion ($39.7 billion). 
    - On the morning of May 20, the shares slumped to HK$3.91 
before they were suspended at the company's request. More than 
170 million shares were traded in the first hour of the trading 
session, far more than its daily average over the previous 
month, according to Thomson Reuters data. 
    - Reuters: Hanergy under investigation after shares plunge 
nearly 50 pct - source  ID:nL3N0YB1Y6  
     
      
     
 
    - For previous columns by the author, Reuters customers can 
click on  LARSEN/  
     
      
  
 
 (editing by Quentin Webb and Katrina Hamlin) 
 ((peter.thal.larsen@thomsonreuters.com)(Reuters messaging: 
peter.thal.larsen.thomsonreuters.com@reuters.net)) 
 
Keywords: HANERGY TFP STOCKS/BREAKINGVIEWS