Hong Kong stock regulator flags more companies for share concentration
SFC notes 13 cases so far this year, already close to last year’s total of 15, and warns a lack of public float can lead to high volatility
Hong Kong’s securities regulator has put a spotlight on highly concentrated shareholding this year, a move interpreted by market analysts as a warning about sharp price swings on small-cap stocks.
For example, the controlling shareholder and 18 shareholders of Desun Real Estate Investment Services Group, a Sichuan-based property management firm, held a combined 99.53 per cent of total issued shares as of July 21, according to an SFC announcement on Monday.
The firms cited by the SFC were small- and mid-cap stocks, with market values between HK$600 million (US$89 million) and HK$9 billion. The regulator warned that when ownership was concentrated among a few shareholders, even small trades could cause sharp price swings.
Andrew Lam, managing director at audit firm BDO, said market funds and investor attention were heavily focused on “A plus H” listings – firms with both Hong Kong shares, called H shares, as well as A shares listed in mainland China – as well as biotech companies and specialist tech leaders.
“Old-economy small- and mid-caps lack market appeal and suffer from light daily trading, making it easy for limited capital or specific buyers to absorb most floating shares and trigger high concentration,” he said.
While an SFC alert does not mean illegality and is not necessarily negative, share prices often become volatile afterwards