2015-05-21

Another Chinese Company Implodes On Hong Kong Exchange

American Indian tribes in the western portion of the U.S. would sometimes hunt bison by chasing entire herds off the edge of a cliff.

Bloomberg: First Hanergy Now Goldin: Hong Kong Stocks Drop Like Stones
Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd., controlled by billionaire Pan Sutong, plunged more than 60 percent in Hong Kong trading Thursday. There was no immediate explanation for the drop. Before the rout, the two stocks surged more than 300 percent in 2015 for the biggest gains on the Hang Seng Composite Index.

The tumble follows the mysterious 47 percent plunge in 24 minutes by Hanergy Thin Film Power Group Ltd. on Wednesday, which erased $19 billion in market value before trading was suspended. The companies have other similarities. Hanergy is also controlled by single billionaire owner -- Li Hejun. Almost no analysts tracked Goldin Financial or Hanergy even as their market values swelled to more than $30 billion, making them among Hong Kong’s biggest listed companies, while doubts over the sustainability of the rallies increased.

“It’s a contagion effect,” said Nick Cheng, chief derivatives trader at Liquid Capital Markets Ltd. in Hong Kong. Investors “are now rushing to take profit and everyone’s suddenly running for the exit,” he said. The volatility “will damage investor confidence with such a reputable stock exchange.”

...“Valuations are ridiculously high,” Castor Pang, the head of research at Core Pacific-Yamaichi in Hong Kong, said by phone. “The stocks surged too much and no one knows why.”

Goldin Financial had revenues of HK$236 million ($30 million) for the six months ended December. The company has a wine trading business, which includes vineyards in California and France, and also does factoring -- buying the accounts receivables of other companies at a discount. More than 99 percent of its net income for the period came from an increase in fair value of a 27-story office tower being constructed in Hong Kong’s Kowloon Bay district, its sole property holding.

Goldin Properties is developing a $10 billion, 89-hectare (220-acre) parcel of land in Tianjin in northeastern China, including a 117-story office tower, luxury villas, and a polo field.

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