Hong Kong's second board plumbs record lows amid market jitters (updated)

Qpl International Holdings

28/06/2017 05:57

* Slide in penny stocks hammers Growth Enterprise Market 
    * Activist shareholder says margin calls may have sparked 
sell-off 
    * Analyst warns slide could spill over to broader market 
 
 (Updates shares, adds quote) 
    HONG KONG, June 28 (Reuters) - Hong Kong's second board 
plumbed record lows on Wednesday, having lost more than 8 
percent of its market value the previous day as investors raced 
to reduce exposure to plunging penny stocks. 
    Shares leading the declines on Hong Kong's Growth Enterprise 
Market (GEM)  .SPHKGEM  had been included in a report by 
activist shareholder David Webb six weeks ago titled "The Enigma 
Network: 50 stocks not to own". 
    WLS Holdings  8021.HK , which had a market value of HK$409 
million, was the biggest loser on Wednesday with its shares 
sliding 47 percent, while Greaterchina Professional Services Ltd 
 8193.HK  dropped 34 percent after a 93 percent drop on Tuesday. 
  
    GEM was down 2 percent on Wednesday, after losing nearly 10 
percent on Tuesday in a sell-off that wiped HK$24 billion ($3 
billion) off its market value leaving it at HK$268 billion.  
    Speaking to Reuters on Wednesday, Webb said it was unclear 
what had triggered the sell-off in the "Enigma Network" stocks.  
    "I can only speculate, but it's possible margin calls have 
been triggering the sell-off - it's possible the brokers 
involved have been told to stop lending against those shares," 
he said.  
    "At the moment it's unclear what happened - maybe the people 
operating the network have decided to dump and run." 
    Another stock on Webb's list was China Jicheng Holdings Ltd 
 1027.HK , whose shares plunged 90 percent on Tuesday. Financial 
services firm Lerado Financial Group Co Ltd  1225.HK  said on 
Wednesday it sold HK$24.96 million ($3.20 million) of shares in 
the umbrella maker, which has a market value of HK$1.2 billion.  
    China National Culture Group Ltd (CNCG)  0745.HK  said it 
offloaded 1.63 billion shares in China Jicheng to raise HK$34.85 
million, while QPL International Holdings  0243.HK  sold HK$1.99 
million in the company.  
    All three firms said they decided to sell China Jicheng 
because the stock's price was "extremely volatile" and all sold 
the shares at a loss. 
    Shares of more than a dozen companies plunged over 50 
percent on Tuesday.  
    Hong Kong's second board has seen high levels of volatility 
due to very concentrated shareholdings and concerns have grown 
over the quality of companies listed on the board.  
    Many stocks have jumped sharply on the first day of trading, 
fuelling fears over market manipulation and prompting the city's 
regulators to issue warnings to investors.  
    The exchange issued a denial following speculation on 
Tuesday that it was planning to delist thinly traded shares.   
    "We are aware of market rumours that HKEX had proposed 
earlier that it would force 'zombie stocks' which were traded 
below $1 with inactive transaction to delist. We would like to 
clarify that the above rumour is completely unfounded," the 
exchange said on Wednesday.  
    The market jitters come nearly two weeks after the stock 
exchange unveiled a long-awaited proposal for a new stock 
listing board, stoking renewed concerns over corporate 
governance standards following a series of scandals. 
 urn:newsml:reuters.com:*:nL3N1JD2YV 
    Some market watchers warned the slide in the second board. 
could impact the broader market.  
    "We have to watch out for any spillover effect in the next 
few days," said Linus Yip, chief strategist at First Shanghai 
Securities.  
 
($1 = 7.8011 Hong Kong dollars) 
 
 (Reporting by Donny Kwok, Michelle Price and Elzio Barreto,; 
Editing by Anne Marie Roantree & Simon Cameron-Moore) 
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters 
Messaging: donny.kwok.reuters.com@reuters.net)) 
 
Keywords: HONGKONG STOCKS/SMALLCAPS