China’s biggest LED chip maker tumbles by daily limit in Shanghai
- Shares of Sanan Optoelectronics slide 10 per cent on Wednesday
- Sell-off highlights jittery mood among investors spooked by recent bond default at Kande Xin Composite Material Group
Sanan Optoelectronics, China’s biggest maker of chips for light-emitting diodes, tumbled by the 10 per cent daily limit in Shanghai trading on Wednesday, wiping out 15 billion yuan (US$2.22 billion) in market value over the past month amid mounting scepticism about the company’s accounting authenticity.
The stock slid 1.16 yuan to 10.44 yuan in Wednesday trading, its lowest close since February 2015. The decline has taken its loss in 2019 to 7.7 per cent, compared with a 3.1 per cent gain on the benchmark Shanghai Composite Index.
Traders are getting more sensitive to listed companies’ accounting practices after the recent bond default by Kande Xin Composite Material Group brought the issue into the limelight.
The Shenzhen-listed maker of laminating films said this week that it defaulted on the payment of 1.5 billion yuan of short-term bills. The company said in its third-quarter report released in late October that it had 15 billion yuan in cash. The stock sank 4.8 per cent to 6.15 yuan on Wednesday, capping a four-day loss totalling 22 per cent.
At the centre of the storm surrounding Sanan are concerns over the accounting abnormality of its controlling shareholder. In a shorter-term bill prospectus revealed by Fujian Sanan Group, its advance payment to customers totalled 8.6 billion yuan, far exceeding its combined net assets of 7.12 billion yuan. Some findings also showed some of the companies to which Funjian Sanan made advance payment, either were not registered in the nation’s taxation system or were small ones with few employees.