(Adds comments on share pledges, Huishan share plunge)
By Michelle Price
HONG KONG, April 27 Hong Kong's securities
regulator said on Thursday it would take "a hard look" into
pledging of shares for loans, such as in the case of China
Huishan Dairy Holdings Co Ltd which last month saw a
sudden stock plunge on concerns over its finances.
On March 24, shares of Huishan plunged 85 percent in just a
few hours, wiping $4 billion of its market value in a single day
as investors worried about its financial position.
Trading in shares of China's largest integrated dairy firm
has been halted since that day.
Huishan's controlling shareholder Champ Harvest later said
it had pledged nearly all of its shares to secure loans from
"We do need a hard look at share pledges that unravel," said
Ashley Alder, chief executive of the Securities and Futures
Commission (SFC), when asked about the fall in Huishan shares.
"We do need to scope out the extent to which there are
problems that shareholders need to know upfront."
Alder did not specify what steps the regulator may take as
it examines how shares are pledged for loans, but added any
potential rule changes could take the form of guidelines and not
every share pledge would need to be disclosed.
The regulator will also continue to focus on IPO sponsor
failures, Alder said, when asked whether the SFC planned to
probe banks that worked on Huishan's $1.3 billion listing in
The SFC plans to crack down on overly-valued asset sales by
listed companies in the city, part of a move to clean up capital
market activity in Hong Kong, Alder said.
It also plans to step up scrutiny of initial public
offerings and listed companies, after it recently took a closer
look at IPOs in the small-cap Growth Enterprise Market (GEM) at
the Hong Kong stock exchange because of massive debut price
spikes during listings.
"We hope to tackle quite a longstanding and thorny problem
to do with unrealistic valuations used to support often quite
suspicious asset disposals by listed companies," Alder said
during a media luncheon.
(Writing by Elzio Barreto; Editing by Muralikumar Anantharaman
and Biju Dwarakanath)