B-shares drop drives gauge to steep fall
Source: Bloomberg News |
June 10, 2011, Friday
|
Print Edition
Print Edition
SHANGHAI'S US dollar-denominated B shares sank, driving the benchmark index to the steepest drop since October 2008, on speculation foreign investors are cutting holdings amid reports of accounting frauds at Chinese companies listed overseas.
The Shanghai B Share Index, comprising 53 stocks that overseas investors can own, slumped 7.9 percent to 256.91 at the close, the biggest decline since October 27, 2008. The close was the lowest since September 21. Foreign investors are restricted from yuan-denominated A shares through quotas.
Regulators and investors have increased scrutiny of Chinese companies trading in North America amid allegations against Longtop Financial Technologies Ltd and Sino-Forest Corp. Shares also slid on concern the central bank will keep raising interest rates even as the global recovery falters.
"It looks like a spate of accounting scandals related to China's overseas-listed companies are hurting the integrity of Chinese firms here and prompting selling by foreign investors," said Wang Weijun, a strategist at Zhejiang Securities Co.
Inner Mongolia Yitai Coal Co slumped by the 10 percent daily limit to US$5.57. Huaxin Cement Co, the Chinese affiliate of Holcim Ltd, plunged the maximum 10 percent to US$2.19. They made up 45 percent of the decline on the Shanghai B-share index.
Hong Kong-based Longtop was sued by an investor last month who alleged the software provider overstated profit margins and concealed adverse facts. Short-seller Carson Block at Muddy Water Research said Sino-Forest, the Ontario- and Hong Kong-based operator of tree farms, overstated its timberland holdings and production, an allegation it denied.
The United States Securities and Exchange Commission began a probe last year into reverse takeovers, where a closely held firm becomes public by buying a shell company that already trades.
The Shanghai B Share Index, comprising 53 stocks that overseas investors can own, slumped 7.9 percent to 256.91 at the close, the biggest decline since October 27, 2008. The close was the lowest since September 21. Foreign investors are restricted from yuan-denominated A shares through quotas.
Regulators and investors have increased scrutiny of Chinese companies trading in North America amid allegations against Longtop Financial Technologies Ltd and Sino-Forest Corp. Shares also slid on concern the central bank will keep raising interest rates even as the global recovery falters.
"It looks like a spate of accounting scandals related to China's overseas-listed companies are hurting the integrity of Chinese firms here and prompting selling by foreign investors," said Wang Weijun, a strategist at Zhejiang Securities Co.
Inner Mongolia Yitai Coal Co slumped by the 10 percent daily limit to US$5.57. Huaxin Cement Co, the Chinese affiliate of Holcim Ltd, plunged the maximum 10 percent to US$2.19. They made up 45 percent of the decline on the Shanghai B-share index.
Hong Kong-based Longtop was sued by an investor last month who alleged the software provider overstated profit margins and concealed adverse facts. Short-seller Carson Block at Muddy Water Research said Sino-Forest, the Ontario- and Hong Kong-based operator of tree farms, overstated its timberland holdings and production, an allegation it denied.
The United States Securities and Exchange Commission began a probe last year into reverse takeovers, where a closely held firm becomes public by buying a shell company that already trades.
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