The Securities and Futures Commission has applied for a court order to recoup HK$1 billion raised by mainland sportswear-fabric maker Hontex International Holdings in its initial public offering three months ago - the first such move by the stock market watchdog. The writ submitted to the High Court yesterday alleges Hontex contravened sections of the Securities and Futures Ordinance covering deception and fraud. If successful, the money raised in the share sale will be paid back to initial subscribers and those who have bought the stock since the company listed on Christmas Eve. On Tuesday, the regulator ordered the suspension of Hontex shares after just 64 days of trading, the shortest period on record. Hontex, based in Fujian and chaired and co-founded by Taiwanese businessman Shao Tenpo, manufactures quick-dry, chemical-fibre knitted fabric for sportswear. Repeated calls to the company's headquarters in Fuqing and its Hong Kong office went unanswered. Its sponsor, Mega Capital, a Taiwanese financial company, did not return calls, while its listing auditor KPMG declined to comment. The SFC writ seeks to ban Hontex and its four related companies from disposing of the HK$997.40 million raised in the IPO. The commission also seeks to freeze six bank accounts Hontex has with the Bank of East Asia holding deposits of HK$871.17 million. Finally, the watchdog has asked the court to appoint a receiver to recoup the total proceeds and distribute them to investors who subscribed to the IPO or who have traded in the shares since listing. Legislator Chim Pui-chung, who represents the brokerage industry, questioned why the SFC had approved the stock exchange's decision to let the company go public but then suspended it from trading just a few months later. 'The SFC has to approve new listings vetted by the stock exchange, which is a lengthy process. But then it finds a problem shortly after this listing. What is going on?' Chim said. However, people familiar with the SFC's action said the problem with the company did not appear at the time of the listing application, but emerged about a week ago and the regulator acted swiftly to make sure Hontex did not move the IPO proceeds out of Hong Kong. Christopher Cheung Wah-fung, chairman of the Hong Kong Securities Professionals Association, said the SFC had reacted quickly to protect investors and maintain an orderly market. 'There are not many retail investors trading in this company. It is mainly institutional investors who have been interested in it,' he said. Sun Hung Kai Financial executive director Joseph Tong Tang said only a few clients of the brokerage had subscribed to Hontex shares. In its listing prospectus, Hontex painted a rosy picture of a strong profitable business which expected to earn 183.37 million yuan (HK$208.26 million) for the six months to the end of June last year, up 93 per cent on the same period in 2008. It reported strong profit growth in the three years leading up to its listing, with earnings of 242.339 million yuan for 2008, up 42 per cent on 2007, which was up 66 per cent on 2006. Hontex cited some big-brand sportswear companies as its clients, including Li Ning, Anta and Mizuno. Despite the claims, Hontex was not seen as a must-have stock by investors, and ended up pricing its IPO at HK$2.15, the low end of the indicative range, and on its debut it fell 8.4 per cent to close on HK$1.97. The stock has since traded between HK$2.63 and HK$1.87. Its last close was HK$2.06 on Monday. At the time of the listing, Shao said the group would spend about 35 per cent of the offer's proceeds to establish 20 flagship MXN shops in key cities and spend a further 26 per cent on a major new advertising campaign. MXN has 500 franchised shops. Another 13 per cent of the proceeds was earmarked for improving and expanding manufacturing at its plant in Fuqing.