SFC orders trading halt on China High Precision

Regulator suspends manufacturer from trading as the firm plans price-sensitive announcement

PUBLISHED : Thursday, 23 August, 2012, 12:00am
UPDATED : Thursday, 23 August, 2012, 2:13am

In a rare move, the securities watchdog suspended China High Precision Automation from trading yesterday.

This is the first time the Securities and Futures Commission (SFC) has suspended a company since March 2010 when it halted trading in Fujian fabric maker Hontex International. A spokesman for the regulator declined to elaborate on the move. Once such an order is issued, agreement from the entire SFC board is needed before the company can resume trading - a highly complicated process. That was why, market insiders told the South China Morning Post, the regulator exercised the option only in extreme cases where investor interest was severely jeopardised.

China High Precision said it requested the trading halt, pending an announcement on price-sensitive information, but it also noted that the SFC banned it from trading.

"The company is in the process of seeking professional advice and shall make a price-sensitive information announcement on or before the resumption of dealings in the shares of the company," chairman Wong Fun-chung said in a statement.

The SFC suspended Hontex amid claims that the company gave misleading information in its listing prospectus in 2009. Shareholders this week approved Hontex's plan to pay back HK$1.03 billion by buying back all the shares owned by its 7,700 small shareholders.

China High Precision, which makes industrial automation instruments, has been in the limelight since it claimed its business involved "state secrets" and cited that as the reason for not providing sufficient information to its former auditor, KPMG. It first listed in November 2009, but was suspended for nine months from October as KPMG resigned as its auditor over a lack of access to information necessary for an audit.

The company resumed trading earlier this month after saying it had not been able to provide all the information to KPMG as certain businesses of the group involved "state secrets". It appointed another accounting firm, Pan-China, for a special audit. Pan-China said the interim result for last year's first half gave a "true and fair view" of the company.

China High Precision will have a shareholders' meeting tomorrow to approve Pan-China as its new auditor.

First China Securities chief executive Kenny Lee Yiu-sun said the SFC should require companies to clarify any business involving so-called state secrets. "If all companies use state secrets as an excuse for not making sufficient disclosure, it will be tough for investors. For companies that are involved in state secrets, the SFC needs to consider if they are suitable for listing," Lee said.

China High Precision closed on Tuesday, when it last traded, at HK$1.24.