Shares in Chaoda Modern Agriculture fell to a two-year low yesterday as investors continued reacting nervously to a Hong Kong tabloid report claiming the fruit and vegetable producer has overstated the size of its land bank.
Chaoda told the stock exchange late last Friday it had initiated legal action against Next magazine, which published a May 25 report based on limited site visits alleging Chaoda had exaggerated the size of some of its farms. But when investors got their first chance to trade on the agricultural firm's announcement following the bank holiday weekend, Chaoda's stock slumped 9 per cent to HK$3.18.
A Chaoda spokesman declined to comment.
The farming firm's shares have lost 31 per cent of their value since Next released its allegations. The stock has lost 46 per cent this year.
In its statement last Friday, Chaoda said its figures on land holdings were accurate, and called the Next report 'inaccurate and piecemeal'. The firm said Next's reporter had visited just a few of its sites, and in one case posed as a buyer to interview its employees. A Next representative did not return calls.
Castor Pang, head of research at Core Pacific-Yamaichi, suggested Chaoda could provide more information about its land. 'The company needs to improve its transparency,' he said.
It is difficult for investors to verify farm ownership on the mainland, which has no centralised registry for agricultural land. Big farmers tend to strike land-use agreements with collectives of rural villagers in transactions supervised by village heads.