At the same time, Mr Li subscribed for the same amount of shares at the same price from the company.

The company's latest placement followed similar moves on November 15, 2001, and October 24 last year, although the size of those issues were smaller, at 25 million and 29 million shares, respectively.

Trading in QPL shares was suspended on the day of the placement announcement and, when it resumed the following day, the frame-maker's share price slumped 16 cents, or 9.3 per cent, to $1.56. QPL shares closed at $1.53 yesterday.

The sharp slide came as little surprise to market watchers. A placement typically causes a stock to fall heavily because of arbitraging between the new and old shares. Investors also want to sell because of the dilution effect that the enlargement of the share base has on earnings per share.

Such placements have often been criticised for being unfair to minority shareholders because only selected investors are offered shares at a discount to the market.

Minority shareholder activist David Webb said that Hong Kong must adhere to international financial standards if it wanted to be considered an international financial centre. Britain, for example, has rules that prevent minority and retail shareholders being exploited in the same way. British companies are limited to placing new shares equivalent to a maximum of 5 per cent of the company's share capital in any one year, and to 7.5 per cent in a rolling three-year period. And those new shares must be priced at discounts of no more than 5 per cent to the market.

In Hong Kong, companies can issue up to 20 per cent of their existing shares with no limit to the number of placings made, while the placement price can be as much as a 50 per cent discount to the market price.

Core Pacific-Yamaichi analyst H.C. Kwan, who forecast QPL's placement needs in December last year, said he would not recommend to potential investors the stock of any company that was expected to place shares soon because of the risks of a hefty sell-off.

Yet on the same day as QPL's placement announcement, Sun Hung Kai Research analyst Florence Cheung released a report reiterating a 'buy' recommendation. She said the shares were trading on only 6.18 times 2004 earnings.

And while Sun Hung Kai disclosed that its investment banking arm arranged QPL's share placement on October 24, no mention was made that Sun Hung Kai International was arranging the placement made that same day.

Joseph Tang, the head of research at Sun Hung Kai Research, said his team was unaware of the imminent placement because of the 'Chinese wall' which was meant to keep investment bankers from influencing research analysts over deals.

'It was because of the 'Chinese wall' that we didn't know about the share placement prior to it being made public,' he said. 'When we read in the newspapers about it, that was how we knew we had been involved.'

And while QPL's flurry of placements have been painful, analysts said that there was at least a little good news for its shareholders to take home.

With more than $110 million raised in the February 13 placement, the company should have enough cash to service its loans and for operating costs for at least the next six months, they said.

'Investors can now look at the company's fundamentals,' SBI E2-Capital Securities analyst Clement Wong said. 'If the industry picks up, then QPL will benefit as it is one of the market leaders.'

QPL said the share placement was to raise funds 'to strengthen the cash position' and 'to implement future expansion plans out of immediately available funds as and when opportunities arise'.

QPL chairman Mr Li said recently that he was 'optimistic in the long term [about the] performance of the group' because of the forecast recovery in the semiconductor industry.

But the three placements in less than 18 months has left a nasty taste in investors' mouths.

Graphic: qpl25gbz