Food producer China Minzhong Food Corp Ltd on Monday became the first Singapore-listed Chinese firm to come under attack by a short-seller, which wiped off more than 50 percent 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 .
China Minzhong, which until Monday's share price slump had a market value of around $520 million, 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 to its peers. Glaucus said they and their associates have 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 percent stake in February to Indofood Sukses Makmur Tbk PT. Indofood had no immediate response to the queries on China Minzhong.
Other large investors include Franklin Templeton Investments Corp, which holds just under 11 percent of the food producer, according to Thomson Reuters data.
Big Blow
Analysts said China Minzhong will 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 up-hill task (especially without GIC's backing now) for the company to re-build confidence," Lim & Tan Securities wrote in a note.
Shares in China Minzhong fell 47.8 percent in two hours of trade before the company requested a trading halt. Nearly 24 million shares were traded, almost ten times the average full day volume traded over the past month.
Four analysts have a 'buy' or 'strong buy' on the stock, Thomson Reuters data shows. China Minzhong is due to release full-year results on Aug. 29.
A number of Chinese companies listed in Singapore ran into accounting problems in 2008 and 2010, denting investor confidence in the stocks, known as S-chips.
The Singapore Exchange has since then taken steps to improve corporate governance of listed companies and after the trading halt, the regulator said it had asked China Minzhong to confirm the company was in compliance with the rules.
China Minzhong is not the only China-based stock targeted by Glaucus this year.
The group, whose research is overseen by former lawyer Soren Aandahl, accused Hong Kong-listed China Metal Recycling Group of fraud in January this year. Hong Kong's securities regulators has since applied to the courts to have China Metal Recycling liquidated.
Last year, high-profile short seller Muddy Waters attacked Singapore commodity trading firm Olam prompting the company to raise cash as its stock and bond prices tumbled.
Singapore state investor Temasek, stepped in to prop the company, raising its stake to 24 percent from 16 percent.
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 .
China Minzhong, which until Monday's share price slump had a market value of around $520 million, 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 to its peers. Glaucus said they and their associates have 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 percent stake in February to Indofood Sukses Makmur Tbk PT. Indofood had no immediate response to the queries on China Minzhong.
Other large investors include Franklin Templeton Investments Corp, which holds just under 11 percent of the food producer, according to Thomson Reuters data.
Big Blow
Analysts said China Minzhong will 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 up-hill task (especially without GIC's backing now) for the company to re-build confidence," Lim & Tan Securities wrote in a note.
Shares in China Minzhong fell 47.8 percent in two hours of trade before the company requested a trading halt. Nearly 24 million shares were traded, almost ten times the average full day volume traded over the past month.
Four analysts have a 'buy' or 'strong buy' on the stock, Thomson Reuters data shows. China Minzhong is due to release full-year results on Aug. 29.
A number of Chinese companies listed in Singapore ran into accounting problems in 2008 and 2010, denting investor confidence in the stocks, known as S-chips.
The Singapore Exchange has since then taken steps to improve corporate governance of listed companies and after the trading halt, the regulator said it had asked China Minzhong to confirm the company was in compliance with the rules.
China Minzhong is not the only China-based stock targeted by Glaucus this year.
The group, whose research is overseen by former lawyer Soren Aandahl, accused Hong Kong-listed China Metal Recycling Group of fraud in January this year. Hong Kong's securities regulators has since applied to the courts to have China Metal Recycling liquidated.
Last year, high-profile short seller Muddy Waters attacked Singapore commodity trading firm Olam prompting the company to raise cash as its stock and bond prices tumbled.
Singapore state investor Temasek, stepped in to prop the company, raising its stake to 24 percent from 16 percent.
