Shares of China Rongsheng and Glorious Property fall after chairman Zhang Zhirong quits

Exit of chairman at Rongsheng and Glorious Property raises concern

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 2:37am

Shares of China Rongsheng Heavy Industries and Glorious Property fell sharply yesterday after their chairman, Zhang Zhirong, quit.

Zhang's resignation fuelled investors' concerns about the firms' operations and financial condition.

Shipbuilder Rongsheng fell as much as 9.3 per cent before closing 6.7 per cent lower on the day at HK$1.40 after the company announced the departure of Zhang and his vice-chairman father, Zhang Dehuang.

Glorious Property fell as much as 5.6 per cent but closed with a loss of 3.2 per cent at HK$1.20.

Three senior managers also left the company.

"An abrupt departure of top management executives at a listed company suggests a very ugly outlook for the firm, because the problems are likely to be fundamentally unresolvable," an equity trader at a European bank said.

A fund manager said about US$38 million of assets in Zhang's accounts were frozen by US regulators over allegations of insider trading.

Well Advantage, owned by Zhang, who was ranked the 48th-richest person in China by Forbes magazine this year, was accused by the US Securities and Exchange Commission of insider trading in the shares of CNOOC before the Chinese oil firm announced its intention to buy Canadian energy company Nexen.

Rongsheng builds large container vessels and the industry is suffering from an oversupply of vessels and a slowdown in the export sector.

For the first half to June, the company's net profit plunged 82.3 per cent to 215.8 million yuan (HK$268.8 million).

In a statement submitted to the stock exchange, Rongsheng said its chairman wanted to devote more time to his personal endeavours, without citing any reason for the sudden exit.

"The unusual exit of Zhang signals that the shipbuilding company is somewhat near the brink of default," a Shanghai-based fund manager said.

He said the "property business on the mainland is also in great trouble owing to property curbs and difficult access to credit".