46 companies permanently suspended on HKEX

The HK SFC as incompetent as ever....

"As of March 31, there were 46 companies whose stock has been halted for more than three months.

These include many that have not traded for over a year, with some cases stretching back longer.

Hong Kong has a long code of conduct for listed companies, known as the listing rules. But no Hong Kong government body or regulator has the power to levy criminal penalties or fines on company bosses who choose not to release accounts. In Britain, the Financial Services Authority can impose unlimited fines, while in Australia, the Director of Public Prosecutions has the authority to recommend jail terms for very serious breaches of disclosure requirements.

But when Hong Kong businessmen or mainland entrepreneurs fail to disclose important information, they can relax in the knowledge that a halt in share trading is probably the worst thing that will happen to them.

The result is that shares in companies that keep secrets stay suspended for a very long time. Unsurprisingly, getting stuck in zombie stocks for months, if not years, makes investors furious, as well as very scared.

"You know something is going horribly wrong, otherwise why would companies not publish accounts?" said Claude Tiramani, an emerging markets fund manager at Paris-based hedge fund Lutetia Capital. "But you cannot do anything about it. You cannot get your money out."

As Fraser Howie, a Singapore-based stockbroker and the author of Red Capitalism, put it: "These long-term suspensions are direct evidence the listing rules are a fig leaf, designed to make Hong Kong look well regulated when, in fact, it is not. You would not have all these immobile shares if the regulators or the government could compel companies to release information."

Stock suspensions can be costly for investors unlucky enough to hold a frozen share. If the wider stockmarket is rising, you are losing money. You cannot liquidate your position in a suspended share and put the cash in a stock that is likely to go up. The Hang Seng Index rose 58 per cent last year, so investors in Zhejiang Glass paid a big opportunity cost.

But as a spokesman for HKEx said, there is nothing the exchange operator can do.

"Shares that are subject to trading suspensions are allowed to resume trading only after the company provides sufficient information for investors to make sound investment decisions," he said. In other words, until a company agrees to publish information, shareholders' money stays stuck in a stock that cannot trade.

A spokesman for the Securities and Futures Exchange, which oversees the listing rules, did not respond to an email containing detailed questions."