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Tuesday, August 27, 2013

Short-seller hits China food company


SINGAPORE: Food producer China Minzhong Food Corp Ltd became the first Singapore-listed Chinese firm to come under attack by a short-seller, which wiped off more than 50% of its market value in two hours and triggered a trading halt.

Short-sellers have in recent years targeted Chinese companies listed in Hong Kong, Canada and the United States, citing irregularities, but they have so far avoided any of the 143 China-based firms listed on the Singapore Exchange Ltd (SGX).

China Minzhong, which until yesterday’s share price slump had a market value of around US$520mil, was hit after California-based Glaucus Research Group issued a report alleging the company misled investors about sales to its biggest customers.

The report also raised questions over the credibility of China Minzhong’s financial performance compared with its peers.

Glaucus said it and its associates had a direct or indirect short position in the company.

Travis Seet, China Minzhong’s financial controller, told Reuters the company was taking legal advice on how to respond to the report.

He declined to make any further comment and trading was halted pending an announcement from the company.

China Minzhong listed in Singapore in 2010 and has attracted several big-name investors, including Singapore sovereign wealth fund GIC which sold its 14.4% stake in February to Indofood Sukses Makmur Tbk PT.

Other large investors include Franklin Templeton Investments Corp, which holds just under 11% of the food producer, according to Thomson Reuters data.

Analysts said China Minzhong would struggle to recover from its share price plunge regardless of the veracity of the short-seller’s allegations.

“Given the huge damage done already, we believe it will be an uphill task (especially without GIC’s backing now) for the company to rebuild confidence,” Lim & Tan Securities wrote in a note.

Shares in China Minzhong fell 47.8% in two hours of trade before the company requested a trading halt. Nearly 24 million shares were traded, almost 10 times the average full-day volume traded over the past month. — Reuters

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