CSRC investigates appliance giant for alleged breaches of securities laws
Shares of giant appliance maker Guangdong Kelon Electrical Holdings fell yesterday to their lowest level in years on the Hong Kong and Shenzhen exchanges, as it announced it was being investigated by the China Securities Regulatory Commission (CSRC).
'The company is being formally investigated by the CSRC for alleged breaches of securities laws and regulations,' Kelon said.
Amid rumours it was short of cash and unable to pay wages, Kelon - one of the biggest makers of refrigerators and air-conditioners - would not comment beyond its announcement, said a public relations executive acting for the firm.
An executive at another large mainland air-conditioner manufacturer in Shunde told the South China Morning Post many component suppliers had stopped supplying Kelon because they feared they would not be paid.
'Many of Kelon's suppliers are also our suppliers. Previously, its operations were healthy, but now it is cash-strapped, its employees told me,' he said. 'Some said payment of their wages had been delayed, and some workers have moved to other appliance firms.'
A Kelon executive said: 'Don't listen to rumours. These are spread by irresponsible people.'
Kelon's trade and other payables swelled 59 per cent to 4.29 billion yuan last year from 2.69 billion yuan in 2003, according to its annual report. Its auditor, Deloitte Touche Tohmatsu, qualified the results, questioning 576 million yuan of sales and 200 million yuan of sales returns.
Yesterday, Kelon's shares resumed trading in Hong Kong since their suspension on April 28. The stock dived 12.71 per cent to end at $1.03, its lowest in nearly two years.
Resuming trading on the Shenzhen exchange after being suspended on April 27, Kelon closed down 9.9 per cent at 2.64 yuan, its lowest since listing on that exchange in 1999.
A related Hong Kong-listed company, Greencool Technology Holdings, said it was 'not aware of any investigation of [Kelon] or its subsidiaries by CSRC'.
The chairman of both Greencool and Kelon, Gu Chujun, indirectly owned 62.59 per cent of Greencool and 26.43 per cent of Kelon, said the Kelon announcement.
Kelon's biggest shareholder is Greencool Enterprise Development, majority owned by Mr Gu.