Hong Kong’s stock watchdog took the rare step of saying trading in Hanergy Thin Film Power Group Ltd. shares cannot resume without its approval, raising the prospect they will remain suspended for the foreseeable future.
The Securities & Futures Commission’s suspension falls under a rule allowing it to call for a halt when it believes that misleading, false or incomplete information has been included in documents and statements. Regulators were already investigating Hong Kong-listed Hanergy, which has not traded since it requested a halt on May 20 after its shares lost almost half their value in less than half an hour, Bloomberg reported.
“It’s pretty unusual; I have never come across a case like this before,” said Eric Seto, a partner at Morley, Chow, Seto Solicitors, who has worked on criminal SFC prosecution cases. “I think this is just the first step in what will become a criminal prosecution.”
FTSE said on its website Wednesday that it was dropping Hanergy from its FTSE China 50 Index and other indexes effective July 20 because of the suspension.
Liu Yanjun, a public relations manager at Hanergy Thin Film’s Beijing-based parent, Hanergy Holding Group Ltd., declined to comment on the order by the regulator.
Stock Rout
Hanergy originally asked for a trading suspension after a 24-minute, 47% price plunge wiped $19 billion from its market value. A week later, SFC took the unusual step of announcing it had been investigating the company after Hanergy Chairman Li Hejun told the media there was no probe. SFC investigations are normally veiled in secrecy.
Seto said that if the company is found guilty of providing misleading information to SFC, it could be fined a maximum of HK$1 million ($130,000) and Li could face a possible two-year prison sentence. SFC Spokesman Ernest Kong declined to comment. In the handful of other cases where the SFC has ordered share suspensions, the consequences have been serious.
In March 2010, it ordered a halt of Hontex International Holdings Co., which was eventually delisted after the regulator accused it of misleading investors in its listing prospectus.
In December 2013, shares in Qunxing Paper Holdings Co. were halted by the SFC, which subsequently froze the company’s assets. The shares remain suspended.
For Hanergy, although Hong Kong stock exchange trading remains suspended, at least 4.9 billion shares have changed hands over the counter since May 20.
