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Denise Tsang

Hong Kong's first listing of the year was cancelled at the last minute yesterday, prompting a sharp exchange of words between the listing candidate's sponsor and an embarrassed stock exchange over who was to blame.

 Hong Kong-based listing candidate Zhujiang Steel Pipe Holdings told the stock exchange it wanted to withdraw its proposed $69 million listing despite completing its public offering on Monday.

 The company - which was due to start trading on January 25 - said it would return all subscription monies to investors.

 Following the decision, stock exchange executive director Lawrence Fok Kwong-man strongly criticised the company's behaviour.

 Zhujiang Steel Pipe said only that its decision was based on 'various factors' and declined to elaborate further.

 Mr Fok said: 'We are very dissatisfied about this. We repeatedly asked the company to state its reasons for almost the entire day yesterday.'  The listing candidate's sponsor, Oriental Patron Asia, defended its position, saying it could not force its client to say what it did not want to.

 It said Zhujiang Steel Pipe's controlling shareholder, Chan Yiu-hoi, who would have owned 70 per cent of the company after the listing, had rejected a guarantee not to pledge or trade his shares within one year of the listing.

 The 12-month lock-in period is harsher than normal standards, which generally limit substantial shareholders from disposing of their interest in a listed company to within six months of the flotation.

 Oriental Patron said Mr Chan felt the warranty - a prime condition of the listing - was unfair and blamed the stock exchange for laying down such a 'harsh' condition.

 Mr Fok said: 'If it is unfair, why did the company begin the share sale last week?'  He said the condition was 'initiated' by Oriental Patron, which proposed it as a solution to stock exchange listing committee concerns over the possible impact of the controlling shareholder's personal financial arrangements.

 Before the initial public offering, Mr Chan repaid more than $10 million in shareholder loans due to Zhujiang Steel Pipe.

 However, it is understood Mr Chan sought personal financing to settle the loan, which raised concerns at the listing committee over whether the financing would affect the potential public company.

 Oriental Patron toned down its comments last night, saying it 'was not sure' who proposed the condition to Mr Chan.

 The stock exchange's concern over such issues has been heightened by recent listings such as Q-Tech Holdings and GKC Holdings which saw shareholdings reshuffled within one year of their listing, prompted by shareholders' failure to pay margin loans.

 Zhujiang Steel Pipe said: 'The directors have come to the decision after considering various factors and are of the view that it is more beneficial to the company to postpone the listing application for fund raising purposes.'  Mr Fok insisted the company must start from the beginning of the listing process should it seek to list on the stock exchange again.

 Based in Hong Kong but making electric resistance welded steel pipes in the mainland, Zhujiang Steel Pipe originally intended to use the proceeds of the issue to trim debt, diversify products and develop distribution networks.

 Recent poor market sentiment worsened yesterday as H shares and red chips dropped sharply.

 The Hang Seng China Enterprises Index, which tracks H shares, fell 2.66 per cent to 333.09 while the Hang Seng China Affiliated Corp Index, which tracks red chips, sank 2.16 per cent to 754.84.

 H-share China Southern Airlines yesterday became the latest mainland play to issue warnings on its attributable profit.

 It said it lost money last year for the first time in two decades amid slumping demand and rising competition.



Pipe listing goes down the tube at 11th hour