Warning prompts suspension of trading in BaWang shares
Trading in BaWang International Group shares was suspended yesterday after the mainland's drugs authority warned that packaging of two of its men's herbal shampoo products contained misleading information.
The suspension comes two months after some of the company's products were said to contain cancer-causing chemical 1,4-dioxane.
Analysts believe that the action will further tarnish the shampoo-maker's health-conscious image and hurt its market share.
The price of BaWang shares dropped 7.27 per cent to HK$3.57 before trading was suspended at 10.54am yesterday morning. The company has applied to resume trading from Monday.
The State Food and Drug Administration issued a warning on Thursday, saying that claims that the company's shampoos promoted hair growth or reduced loss had not obtained its approval. It ordered the company to rectify the matter.
BaWang yesterday told the Hong Kong Stock Exchange that there had been a 'mis-description of labelling' for the two recently launched products. It planned to change the packaging's design and have the labels replaced to meet official requirements.
The incident comes as another blow to the mainland's biggest shampoo manufacturer, which is still struggling to recover from the dioxane revelation.
In a report in mid-July, Next Magazine said BaWang's products contained high levels of 1,4-dioxane. However, the State Food and Drug Administration said the levels in the products were safe.
A report by UBS said the revelations could weaken consumer confidence in the company and affect its profitability.
It lowered BaWang's target price to HK$3.20 from HK$4.30 and maintained a sell rating for the company's shares.
Earlier this year, BaWang launched a herbal drinks line with Hong Kong kung-fu star Donnie Yen as its brand ambassador.
