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SCMP Reporter

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.



BEA shares fall further on worry David Li could face US action