angola deal sparks China share
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ANGOLA DEAL SPARKS CHINA SHARES PROBE
By Richard McGregor in Beijing
Monday, April 09, 2007
A small Chinese steel fabricator which announced it had won a construction contract in Angola worth nearly 20 per cent of that country's economic output is being investigated by the securities regulator for allegedly manipulating its share price.
The investigation into Zhejiang Hangxiao Steel Structure, located in the coastal province near Shanghai, underlines the challenges facing the China Securities Regulatory Commission (CSRC) in its oversight of the country's bull share market.
Chinese shares more than doubled in the 12 months from the start of 2006, and have continued to rise strongly in recent weeks following the 9 per cent fall in the index in late February which triggered a global sell-off of shares.
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The Shanghai-listed shares of Hangxiao Steel rose by their maximum daily limit of 10 per cent for the six days before the May 13 announcement that it had won a $4.5bn (�.4bn, £2.3bn) contract to supply building materials for apartments in 12 cities in Angola.
The shares then rose by the daily 10 per cent limit for 12 of the 13 days after the announcement, before falling in recent days after the company said the CSRC was launching an inquiry into “suspected [trading] irregularities”.
The $4.5bn contract is equal to about 16 per cent of Angola's gross domestic product; five times China's entire exports to the African country last year; and 23 times Hangxiao's 2006 revenues.
Steel Business Briefing said that an initial batch of steel, of 50,000 tonnes, had been ordered by Hangxiao from Chinese mills, but this represented only about 1 per cent of the total requirement for the project.
Hangxiao's contract had been signed with the China International Fund, one of the many local companies involved in the booming infrastructure business in Africa.
Chinese companies have invested heavily in African resource projects.
A spokesman for Hangxiao, who would only identify himself as “Mr Chen”, denied the company had been involved in any manipulation of its share price.
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