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Shanghai blood products firm's stock dives 63.2b yuan
EVEN by the standards set in China's slumping stock market this year, this is extreme.
Shanghai RAAS Blood Products Co, which manufactures and develops human blood products, resumed trading this month following a suspension in February pending what the company referred to as a "major restructuring".
Its shares have plunged by their 10 per cent daily limit for 10 consecutive sessions, losing 63.2 billion yuan (S$12.6 billion) in value.
It has been bitten by China's roughly US$2 trillion equity market decline this year. Shanghai RAAS' tumble has triggered margin calls on shares that have been pledged as collateral for loans, sending it further into a spiral.
"Investors are fleeing after RAAS resumed trading, triggering margin calls, which have only created more panic selling," said Lv Changshun, fund manager at Beijing Dajun Zhimeng Investment Management Co.
Shenzhen-listed Shanghai RAAS said in January 2015 it would begin investing in stocks, after the Shanghai Composite surged 21 per cent the previous month. This year's decline, in which the index has plunged about 23 per cent, has dealt a heavy blow to its equity holdings.
It accrued losses of nearly 900 million yuan from securities investments alone in the first nine months of this year, compared to a 100 million yuan profit a year earlier, the company disclosed in its third quarter earnings.
Shanghai RAAS said that "fluctuations in the capital market" were the main reason for the firm's net loss of nearly 1.3 billion yuan in the first nine months.
In a reply to investor queries on a disclosure platform on Wednesday, Shanghai RAAS acknowledged that controlling stakeholders' "stock pledging loans have defaulted and may result in forced sales of the company's shares".
Earlier this month the company said that 2.95 per cent of its shares must be sold in the six months after Dec 12 by three separate asset management programmes, which have had to close after falling below stop-loss thresholds. BLOOMBERG