Jiayuan shares suspended following crash that coincided with selling by chairman and his wife, disclosure shows

  • Jiayuan International chairman Shum Tin Ching and his wife, Wang Xinmei, sold 93.62 million shares last Thursday
PUBLISHED : Tuesday, 22 January, 2019, 2:24pm
UPDATED : Tuesday, 22 January, 2019, 10:55pm

Trading in the shares of a Hong Kong developer, which holds the record for some of the smallest abodes built in the city, was suspended on Tuesday after they lost more than 80 per cent of their market value last week after a massive sell-off led by its chairman and his wife.

Jiayuan International Group chairman Shum Tin Ching and his wife Wang Xinmei sold a combined 93.62 million shares on Thursday at an average price of HK$2.70, according to a Hong Kong stock exchange filing on Monday.

The afternoon suspension occurred after the stock fell 22.6 per cent at HK$3.70, “pending the release of an inside information announcement in relation to clarifying recent media reports”, a filing said.

“It could be a forced sell-off by a bank, if Shum had pledged the stocks for lending, and a margin call was triggered when the stock price kept dropping. Or it could have been sold for other reasons ... whatever the case, I don’t think the company has made the whole situation clear to investors,” said Frank Xu, an analyst at hedge fund Q Fund Management.

The trades on Thursday accounted for 26 per cent of the company’s trading volume, and reduced the shareholding of the chairman and his wife to 53.92 per cent from 57.65 per cent.

The sell-off underscores how the light-touch regulatory framework in one of Asia’s largest capital markets – Hong Kong’s stock prices are not encumbered by any “circuit breakers” or percentage halts – can catch minority investors unaware, especially if corporate insiders do not make timely disclosures.

A company filing by Jiayuan following the stock plunge on January 17 made no mention of the share sale by either the chairman or his wife, stating instead that the board “is not aware of any specific reasons for such price and volume movements nor of any information which must be announced and published to avoid a false market in the shares of the company”.

The filing also stated that the company had paid back a US$350 million US bond maturing Thursday and that “the business operation and financial condition of the group is normal as usual”.

During a lunch with investors on Monday, Shum said that “malicious” short sellers and misinformation may have been a factor in the share plunge.

Chinese developer behind US$1 million nano flats comes under severe selling pressure as shares plunge

In June 2017, Shum had pledged more than 600 million shares under his name to China Construction Bank International for a loan, according to public documents.

Jiayuan’s shares rebounded 74.6 per cent on Friday and gained another 8.64 per cent on Monday. At midday on Tuesday the share was down 22.6 per cent down at HK$3.7.

Jiayuan has been under pressure amid a sluggish housing market as the company sold just two of 73 units on offer at the T Plus micro flat project in Tuen Mun on December 8.

The units, some in configurations of 131 square feet, were being offered at HK$2.85 million (US$363,291).

The project will be relaunched with discounts after Chinese Lunar New Year, according to Stan Group chairman Stan Tang, which co-developed the two projects with Jiayuan.

Jiayuan was among a number of Hong Kong-listed companies that saw a wave of selling last week. The rout affected more than 10 companies, wiping out HK$37.4 billion in market value. Jiayuan accounted for most of that loss on record volume.

Additional reporting by Lam Ka-sing