HK freezes client assets linked to firm that surged 8,500%

HONG KONG • The securities regulator in Hong Kong has ordered brokerages to freeze client assets linked to suspected market manipulation in shares of China Ding Yi Feng Holdings (DYF), the obscure investment firm whose mysterious 8,500 per cent rally over the past five years made it the best performer in MSCI's global stock index.

The Securities and Futures Commission (SFC) has been investigating suspicious trading in DYF since mid-2018, it said on Wednesday, calling the firm's share price "irrationally high".

DYF was valued at around 95 times net assets, one of the most expensive levels worldwide, before the SFC suspended the stock and searched the firm's offices earlier this month.

The SFC did not name the owners of the frozen assets and said it is not investigating the brokerages, which collectively hold about 38 per cent of DYF's issued shares, according to Hong Kong's stock exchange. SFC spokesman Jonathan Li declined to comment further, while DYF said it will cooperate with regulators.

The case threatens to dent Hong Kong's reputation as one of the world's premier financial hubs. It also calls into question MSCI's decision to add DYF to its global benchmark indexes in November last year.

DYF had a market value of about US$3.6 billion (S$4.85 billion) before trading in the stock was frozen. Led by Taoist scholar Sui Guangyi, the firm has been booking losses for seven of the past eight years.

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A version of this article appeared in the print edition of The Straits Times on March 22, 2019, with the headline 'HK freezes client assets linked to firm that surged 8,500%'. Print Edition | Subscribe