Soho China hit by Gong money laundering scandal
Investors pull out after media reports link property developer to money-laundering scandal involving a Shanxi banking official
Shares in mainland developer Soho China have fallen by 11 per cent after media reports that most of the 41 properties bought for one billion yuan (HK$1.23 billion) by former Shanxi banking official Gong Aiai were sold to her by Soho.
Before the reports on Wednesday, Soho shares traded as high as HK$7.05 on Monday.
On the day the reports appeared the shares declined to HK$6.32, and yesterday they fell further to close at HK$6.27.
The drop in the share price came as investors sold their Soho shares despite denials from the developer that it was involved in any wrongdoing in the sale of properties to Gong, a former deputy manager of the Xingcheng branch of Shenmu Rural Commercial Bank, who is suspected of money laundering on a massive scale.
Xinhua reported that Gong has been arrested by police on suspicion of using multiple identities to buy the properties in Beijing.
On Wednesday, amid the controversy over how Gong acquired the 41 properties, Soho China, which is the largest developer on the mainland, released a statement in response to the media reports. It denied the allegations of any illegal conduct.
Chief executive Zhang Xin also denied money-laundering accusations on her Sina Weibo microblog.
"I believe that honesty is the building block of all human virtues," Zhang wrote.
"This serves as the guiding philosophy for how I live my life, educate my children, and manage Soho China. The government should roll out a property transaction records information system," she said. "This will ensure every transaction is public and everyone can monitor corruption."
But the statement failed to arrest the slide in Soho's share price as more mainland media reports appeared.
On Thursday, the Beijing Morning Post reported that Soho China had become an overseas company after chairman Pan Shiyi and Zhang Xin, his wife, transferred their assets.
One property analyst, speaking on condition of anonymity, said: "This is a political issue and it involves a conflict between the new and old political powers.
"I don't think it will have a long-term effect on the company and its property sales. Soho has good-quality products which allows it to achieve a higher selling price."
Investor fears that the new administration would use the latest case to justify the launch of a fresh round of anti-corruption investigations, sent shares in other developers as well as gaming stocks, tumbling.
Hopson Development Holdings' shares dropped 13 per cent to close at HK$13.88 on Thursday but then recovered to close at HK$14.02 yesterday.