Chaoda suspected of market misconduct

Updated: 2011-09-27 06:54

By Kelvin Sohand Rachel Armstrong(HK Edition)

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Mainland-based vegetable and fruit producer Chaoda Modern Agricultural Ltd, accused in May of accounting malpractices, is under investigation from Hong Kong market misconduct regulators, a government spokeswoman said on Monday.

A string of other mainland-based companies, including Toronto-listed Sino Forest, have faced allegations of fraud and financial irregularities in recent months, many in reports published by investors with short-positions in their stocks.

The news sent Chaoda shares tumbling more than 26 percent to an eight year low of HK$1.10 ($0.14) before Hong Kong Exchange suspended its shares at midday. That compares with a 1.8 percent fall on the benchmark Hang Seng Index.

The Market Misconduct Tribunal hears cases involving insider trading, false trading, price rigging and stock market manipulation, according to its website.

Government spokeswoman Shirley Wong and tribunal spokesman William Chow were not able to provide any further specific details on the case.

Chaoda's spokesman Simon Shi said the company had no comment to make at present.

In May, Chaoda denied a five-page report in the Chinese-language Next Magazine that the size of its farmland in Beijing and Tianjin - as well as Hebei and Fujian provinces - was overstated.

"The board would like to clarify that the contents of the article are not factually accurate and true," it said in a filing then with the Hong Kong Stock Exchange.

The company said it had appointed law firm DLA Piper to take legal action against the article. Chaoda's shares are down more than 75 percent since those allegations first appeared.

In Hong Kong, few companies have faced such claims from short-sellers although a number have faced legal proceedings following reports of accounting problems including China Forestry Holdings.

Fuzhou-based Chaoda, which listed on the Hong Kong Stock Exchange in 2000, says on its website that it has more than 44,282 hectares of farmland at 31 different production bases across the mainland. It said it grew and sold 2.7 million metric tons of fruits and vegetables in 2010.

According to Thomson Reuters data, Blackrock Financial Management Inc held a 4.3 percent stake in Chaoda as of September 14 while Janus Capital Management was recorded on March 22 as having an 8.13 percent holding.


(HK Edition 09/27/2011 page2)