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Mysteries must be explained

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SOME serious questions have been raised by the publication of the latest results from the H share companies - the Hong Kong quoted mainland groups which have pioneered China's move on to the international capital markets. It's not so much the figures and the level of disclosure which have prompted the disquiet. It is the action which has taken place on the stock market ahead of the publication of the figures. In the days preceding the announcement, there were some intriguing flurries in turnover and prices which need investigation and perhaps action.

Among those which stood out were shares in Kunming Machine Tool. They shot up 40 cents to $3.40 in the couple of days before the company announced its results. The surprise of the figures from Kunming was a tax windfall which was behind a 155 per cent jump in after tax profits. It was that kind of anomaly on which people can make a quick buck.

There were enough other instances of prices moving ahead of the official release of profit figures from H share companies to prompt the authorities in Hong Kong to take some action. The least they can do is inquire of the circumstances in which shares were bought. If evidence emerges of prior knowledge of figures leading to stock market trading is uncovered, then the rules on insider trading are there to be used.

In fact, some local companies' shares also had made unusual movements before earnings reports were released after the stock market close. At a time when many listed firms are scheduled to announce interim results, watchdogs' eyes must be sharpened. The authorities have succeeded in recent weeks in prosecuting a couple of insider-trading cases. Their efforts in bringing Hong Kong in line with international standards are to be applauded. But they must be reminded that there is no room for complacency.

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