China Rare Earth dives as trading resumes

Shares in China Rare Earth Holdings plummeted 39.75 per cent yesterday as it resumed trading after a suspension of four trading days.

The stock fell 33 HK cents to 50 HK cents as investors expressed their concern about the company's differences with its auditors. KPMG quit as auditor this month, a day after it succeeded Ernst & Young. This is the latest example of mainland companies listed in Hong Kong which have recently had disputes with their auditors.

'Given the resignations of the company's auditors within a short period of time, investors naturally wonder what's wrong with its profit and loss account. Investors are also wondering if P chips are trustworthy anymore,' Fullbright Securities general manager Francis Lun Sheung-nim said.

China Rare Earth, one of the country's largest processors of rare earth and refractory materials for glass and metallurgy, was forced to delay announcing last year's audited results until June following resignations of KPMG and Ernst & Young.

The delay was deemed to be a breach of listing rules, with Hong Kong Exchanges and Clearing reserving the right to take action against China Rare Earth.

China Rare Earth company secretary Law Lap-tak yesterday said: 'It happened so suddenly that we have no idea why KPMG resigned. KPMG owes us an explanation.'