BEA shares fall further on worry David Li could face US action
Bank of East Asia shares continued to slide yesterday after a brokerage advised investors to sell the stock amid concern chairman David Li Kwok-po could face prosecution in the United States over alleged insider trading.
BEA slipped more than 1 per cent during trading before closing down 0.328 per cent at HK$45.60, while the benchmark Hang Seng Index rose to a record high.
The stock fell 1.19 per cent on Thursday after the bank confirmed Mr Li had received a notice from the US Securities and Exchange Commission saying it might bring a civil enforcement action against him in connection with an investigation into the trading of Dow Jones shares. Mr Li is a director of Dow Jones.
Citi yesterday downgraded its recommendation on BEA stock to 'sell' from 'buy', citing concern about a possible narrowing of net interest margins in the mainland and the impact of the SEC investigation.
Tracy Yu, an analyst at Citi Investment Research, said in a report the probe would hit BEA's shares but was unlikely to hurt its operations.
'Nonetheless, the situation might divert management attention away from developing its [mainland] business,' Ms Yu added.
Mr Li said yesterday that he would successfully defend himself if the SEC did initiate proceedings.
The development followed weeks of speculation after a Hong Kong couple with links to Mr Li was accused by the SEC of using inside information about an impending bid for Dow Jones by Rupert Murdoch's News Corp to make millions of dollars trading Dow Jones shares.
'Some investors may be concerned that the SEC's potential prosecution would affect the bank,' said Louis Tse Ming-kwong, a director at VC Brokerage.
Credit Suisse analyst Bill Stacey said the brokerage kept its 'neutral' rating. He said an SEC inquiry into Mr Li would be negative, but the rating on BEA was influenced more by 'earnings and fundamental issues'.
Mr Li is an independent non-executive director of SCMP Group.