Moody’s red flag report rocks listed China firms

HONG KONG: Moody's ratings agency's warnings about accounting and corporate governance risks at dozens of Chinese companies are further dampening market sentiment already fragile because of Europe's debt woes, sending Hong Kong-listed shares plunging.

The Moody's report comes as US and Chinese officials meet in Beijing to discuss joint supervision of China-based audit firms that review US-listed companies.

“This, for sure, is a confidence crisis as it will be difficult for investors to distinguish which Chinese private company is good and which is bad, so they choose to avoid these companies,” said Ben Kwong, associate director of KGI Asia Ltd.

Shares of Chinese coal companies to property developers nose-dived yesterday to multi-month lows.

Property developer Longfor Properties Co Ltd fell as much as 16% to HK$11.54. Cement producer West China Cement Ltd plunged 26.5% to its lowest since August last year, while coking coal miner Hidili Industry International Development Ltd fell 8.2% to HK$5.97, its weakest in four months.

Winsway Coking Coal Holdings Ltd fell 12.7% to an all time low of HK$2.81, while China Lumena New Materials Corp fell 13% to the lowest in four months.

Moody's said that the most common corporate governance weaknesses involved family ownership, which lead to decision-making processes that favoured the interests of some shareholders at the expense of bondholders and creditors. - Reuters