A Chinese construction company under investigation for suspected stock price rigging has defended its handling of an announcement of contracts for work in Africa worth US$4.4 billion.
Hangxiao Steel Structure Co., Ltd. issued a statement on Monday saying its Hong Kong-registered partner, the China International Fund Ltd, had failed to supply Hangxiao with details of its contracts with the Angolan government.
The statement to the Shanghai Stock Exchange said the China International Fund declined to disclose copies of its public housing projects contracts with the Angolan government, saying it had agreed not to disclose the contracts to a third party.
The statement also warned investors of possible risks as the contracts might terminate anytime when its partner failed to pay or other uncontrollable events like natural disasters, government policy changes and violence disrupt the projects.
The statement gave no indication for when trading of its stock, which was suspended on March 19, would resume.
The two-year contracts first aroused suspicion among the steel sector, where experts claimed they involved 3.3 million tons of steel products, the 21st Century Business Herald reported on Monday.
It said Hangxiao Steel Structure, however, produced only 300,000 tons of steel structures in 2006.
Zhou Jinfa, president of the Zhejiang-based company, dismissed the discrepancy, saying the plant had a total production capacity of 680,000 tons and the contracts allowed for subcontracts.
"The company is expected to examine the preparatory work of six construction sites in Angola in mid April. This is no international joke," Zhou said.
He noted none of the company's directors and senior executives were involved in stock speculation, adding the company also wanted to know who had benefited from the speculation.
"Talks (with the China International Fund Ltd.) have been long and involved many company officials, so it's hard to guarantee discretion before a company announcement," Zhou said.
The company issued a statement in February saying it had signed 34.4 billion yuan (US$4.4 billion) contracts to sell the China International Fund Ltd. construction products and services for its public housing projects in Angola.
In response, its stock price had more than doubled since Feb. 12 from its opening price of 4.24 yuan (55 US cents) to 10.75 yuan, hitting the daily maximum rise of 10 percent 10 times within a month.
The China Securities Regulatory Commission (CSRC) has launched an investigation into Hangxiao for suspected stock price manipulation with bogus contracts.
In an unprecedented move on March 22, the CSRC made a public announcement on a sensitive case before closing the investigation, which analysts say might indicate a tougher stance on malpractice.
The commission has urged the Shanghai Stock Exchange and the local regulatory bureau to also investigate. "We will firmly punish without leniency those who break the law," a senior CSRC official told Xinhua.
China's securities authorities intended to react immediately to abnormal market fluctuations and information disclosures with ulterior motives, the official said.
The Zhejiang Provincial Securities Regulatory Commission said it had launched an investigation into the case and was yet to reach a conclusion.
Under China's regulations, the top management, directorate and board of directors of listed companies are liable to ensure the truth, accuracy, completeness, timeliness and fairness of disclosed information.
Listed companies are also required to clarify rumors pertaining to major changes of the company, like mergers and acquisitions, in a timely way, so as to ensure "fair play" among all investors. Publishing false information is a criminal offence.
(Xinhua News Agency March 27, 2007)