Shares of China’s Huishan Dairy sinks 85%

Bloomberg

Shares of China Huishan Dairy Holdings
Co. sank by a record 85 percent in Hong Kong before the company halted trading.
The sudden crash wiped out about $4.1 billion in market value. A record 779 million shares in the Shenyang-based company changed hands, the most on Hong Kong’s
exchange. Chairman Yang Kai said online speculation its largest shareholder misappropriated 3 billion yuan ($435 million) to invest in Shenyang real estate are untrue, Netease reported, citing a phone interview.
The mysterious tumble will increase concerns about the risks that can befall investors in Hong Kong, after the 47 percent plunge by Hanergy Thin Film Power Group Ltd. in 2015. The move is also a vindication for Carson Block, whose Muddy Waters Capital LLC said in December it was shorting Huishan Dairy and the company was “worth close to zero.” Huishan said at the time allegations in the
report were groundless and contained
misrepresentations.
“This kind of volatility in individual stocks will alert investors of the potential risk about investing in private Chinese companies,” said Ben Kwong, executive director of KGI Asia Ltd. in Hong Kong. “Sharp volatility is sometimes related to margin calls from brokers so if they fail to settle margin calls there may be forced liquidation and that would increase selling pressure.” Liaoning’s government held a meeting Thursday afternoon with 23 creditor banks to discuss Huishan Dairy’s debt, Caixin reported, citing unidentified people.
A Huishan Dairy spokesperson declined to comment, saying the company will issue a statement. Lorraine Chan, a spokeswoman for Hong Kong Exchanges & Clearing Ltd., said the bourse operator doesn’t comment on individual companies. Ernest Kong, a spokesman at the Securities and Futures Commission, declined to comment on the matter. In July and August of 2015, the stock surged 60 percent amid a spate of open-market purchases by CEO and controlling shareholder Yang.