Clutch of small caps plunge as much as 93% in Hong Kong, wiping out $2.2b in value

Hong Kong is no stranger to sudden declines in some of its more obscure companies, where concentrated ownership and complex holding structures stretching across multiple stocks are often blamed for wild swings.
Hong Kong is no stranger to sudden declines in some of its more obscure companies, where concentrated ownership and complex holding structures stretching across multiple stocks are often blamed for wild swings.PHOTO: EPA-EFE

HONG KONG (BLOOMBERG) -A string of Hong Kong stocks suddenly plunged on Thursday (Nov 15)with no explanation, leaving traders to speculate that a forced seller was behind the moves.

More than US$1.6 billion (S$2.2 billion) was wiped from the value of six small-cap stocks, with Sino Haijing Holdings Ltd at one point plunging 93 per cent. Traders pointed to speculation that a large holder might have been forced to liquidate shares after a loan went sour. An employee at Sino Haijing said nobody could respond to questions, while a call to Asia Television Holdings Ltd, which lost as much as 63 per cent, went unanswered.

"Normally when shares crash like this it's usually someone pledging a lot of shares with a broker and failing to meet margin calls," said Francis Lun, Hong Kong-based chief executive officer of Geo Securities Ltd. "These are small companies so it wouldn't cause that much alarm to the market."

Spokesmen for Beijing Gas Blue Sky Holdings Ltd and AUX International Holding Ltd couldn't immediately be reached by phone. The stocks tumbled as much as 71 per cent and 64 per cent, respectively. An employee for China Baoli Technologies Holdings Ltd, which slid 50 per cent, said no spokesman was available for comment. Nobody was immediately available for comment at Skyfame Realty Holdings Ltd, which fell 72 per cent.

Hong Kong is no stranger to sudden declines in some of its more obscure companies, where concentrated ownership and complex holding structures stretching across multiple stocks are often blamed for wild swings. Critics have called on the equity market to tighten its corporate governance oversight, saying the city is a breeding ground for volatility.

Hong Kong's exchange operator said it doesn't comment on individual companies.

An "Enigma Network" of 50 stocks roiled the city's markets last year, triggering a crash in dozens of interlinked companies weeks after activist David Webb published a report. Exchange data show the biggest positions in Blue Sky and Sino Haijing that had been lodged with Hong Kong's securities settlement system were held through Kingston Securities Ltd.