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Hot Stock: Yangzijiang shares down 14%, at 2.5-year low

A SELLOFF in Yangzijiang Shipbuilding stock resumed on Thursday morning after the lifting of a trading halt which had been in place since August 8, when shares dived by as much as 20 per cent, triggering a query from the Singapore Exchange.

As at 10.58am, shares in China's largest non-state owned shipbuilder were trading 14.5 Singapore cents or 13.9 per cent lower at 89.5 cents with some 76.2 million shares changing hands, making it the Singapore bourse's most active. The stock is trading at a two and a half year low.

On Aug 1, Tradewinds, a publication focusing on the global shipping industry, reported that Liu Jianguo, who was described as being "especially closely connected" with Yangzijiang and a "veteran political patron of the shipbuilding industry", was being probed for "serious disciplinary violations".

Tradewinds said this was announced in a statement released in June by Beijing's Central Commission for Discipline Inspection, the Communist Party of China's own powerful anti-graft body. Mr Liu's career included a long period of service in the key shipbuilding region of Jiangsu province, where Yangzijiang's production areas are located. He is also the chairman of a charity foundation set up by Yangzijiang executive chairman Ren Yuanlin.

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On Wednesday after the Singapore market closed, Yangzijiang said in an exchange filing that Mr Ren, who is also the company's founder and controlling shareholder, had taken leave to focus on "assisting in a confidential investigation carried out by certain PRC governmental authorities".

It added that up until Aug 9, Mr Ren had continued to have a decision-making role in major company matters, including recently approving the group's unaudited second-quarter financial results that were released over a week ago.

A trader told The Business Times thats since last Thursday's slide, shares in Yangzijiang may have been oversold.

Citi Research analysts Kwok Wei Chang and Patrick Yau said in a note: "Given that the company has addressed the uncertainty surrounding chairman Ren’s whereabouts, we think that the stock price correction has been overdone. Indeed, the group’s operations and business are expected to carry on as usual, including both its shipbuilding and financing segments, under the leadership of CEO Ren Letian in the interim."

On Aug 5, Yangzijiang Shipbuilding reported that second-quarter net profit had fallen 6 per cent year on year to 936 million yuan (S$186 million), while rising raw material and labour costs cut gross profit margin for the shipbuilding business to 18 per cent, from 21 per cent a year ago.