China fines company for disclosure violation

Updated: 2007-05-14 11:49

Zhejiang Hangxiao Steel Structure Co., a building materials maker based in eastern China, said it was fined by the country's securities regulator for failing to disclose contracts received and for making misleading statements.

The company said it was fined 400,000 yuan ($52,000) by the China Securities Regulatory Commission, while Hangxiao Chairman Shan Yinmu and President Zhou Jinfa each had to pay 200,000 yuan, Hangxiao said Monday in a statement to the Shanghai Stock Exchange. Three other officials of the company, based in Hangzhou city, were each fined 100,000 yuan, Hangxiao said.

The company failed to disclose orders from Angola in newspapers or tell investors about the transaction in due time, according to the statement, which cited the regulator. Comments by company officials relating to regulator's probe of the company were misleading, it said.

Hangxiao said last month the regulator was investigating "suspected irregularities." The company, with a market value of $430 million, said March 13 that it won 34.4 billion yuan of orders from Angola, five times China's 2006 exports to the African nation.

Hangxiao was established in 1994 and is controlled by Chairman Shan, who held 37 percent of the company at the end of last year.


The company's shares started surging in February and were suspended for two weeks until March 13, when Hangxiao announced it had signed a contract with a Hong Kong-based company to supply building products for projects in Angola.

The stock rose by the limit for the next four days and was suspended again on March 19. It resumed trading April 2.

The value of the Angola contract is 18 times Hangxiao Steel's 2006 revenue. China's exports to the African nation totaled $894 million last year, according to the Chinese commerce ministry. The regulator didn't question whether the contract is genuine.

Hangxiao, in a separate statement, also apologized to investors after receiving a notice from the stock exchange criticizing the company and executives for violating disclosure rules.

The company's shares fell 0.45 yuan to 13.53 yuan on May 10. The stock has more than quadrupled this year, outpacing the 81 percent gain in the key CSI 300 Index.

Hangxiao this month said first-quarter profit fell 21 percent to 4.7 million yuan while sales rose 33 percent.

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