China Hongqiao 1378

[winston]

not vested

Shortseller charges sink China Hongqiao shares

by Dominique Nguy

China Hongqiao (1378) slumped by 8.33 percent to HK$7.15 before trading in its shares was stopped yesterday morning following claims that it failed to report accurate production costs when it listed in the Hong Kong market.

Shortseller Emerson Analytics also accused the mainland aluminum company of buying electricity and alumina from connected parties at exceedingly low prices.

In its research report, Emerson Analytics questioned China Hongqiao's claim that its net margin improved sharply to 27.7 percent in 2010 when its peers continued to struggle with single-digit margins.

It accused China Hongqiao of underreporting 11.7 billion yuan (HK$13.2 billion) of self-supplied electricity generation costs between 2010 and 2015.

It also claimed that the mainland firm hid about 21.6 billion yuan worth of costs through underreporting and related party subsidies.

Emerson Analytics estimates China Hongqiao's real profit at less than half of its claim.

Source: The Standard