Shenguan shares down after trading resumes following fraud allegations
Shenguan Holdings Group shares closed yesterday at their lowest level in more than four years in the first day of trading.
Shenguan Holdings Group shares closed yesterday at their lowest level in more than four years in the first day of trading after the mainland sausage casing maker was suspended amid fraud allegations by Emerson Analytics, charges the firm has heatedly denied.
Shenguan dropped 11.44 per cent to finish at HK$2.40, having hit a new 52-week low at HK$2.25 before paring its losses by the end of trading. Some 77.79 million shares changed hands in its heaviest trading in almost four years. The Hang Seng Index fell 1.9 per cent due to the Occupy Central protests.
"The share price did not drop that much. The sentiment on the stock is probably weak, given the allegations and the fact that the company doesn't have a strong growth profile," said a hedge fund manager who declined to be named.
Shenguan's stock was suspended on September 3, just after Emerson Analytics, a group of anonymous equities analysts, published a report alleging inflated profits, repressed costs and fake sales. Last Friday, Shenguan issued a detailed 14-page rebuttal of Emerson's allegations.
The hedge fund manager disclosed that he bought Shenguan shares yesterday.
"I believe this company is real. There will be upside," he said.
Standard Chartered, in a report on September 27, reiterated its rating of Shenguan as "outperform" and its unchanged target price of HK$3.50 for its shares.
Shenguan chairwoman Zhou Yaxian bought four million shares in her company from August 20 to 29, according to the Hong Kong stock exchange website. Since she bought each share at roughly HK$2.85 each, she spent about HK$11.4 million during that period.
