SHANGHAI, Apr. 2 (SMM) - After China Hongqiao company was recently sold short by Emerson Analytics , China Hongqiao company bonds were sold off continuously, making the company apply for an emergency suspension, and because the company needs more time to deal with the 2016 annual audit work problems, and the 2016 annual report will be delayed released. In addition, China Hongqiao is applying for duty exemption to avoid $ 700 million offshore loans default clause.
On Saturday, the letter on prevention and response to Western countries leading by US to contain China's aluminum industry which is issued by China Nonferrous Metals Industry Association was found on internet. It is heard the letter has been submitted to the Ministry of Industry on March 9th. In the letter Weiqiao Group said the recent short forces from the United States against the Shandong Weiqiao Venture Group in Hong Kong's capital market short action, actually aims at strangling two listed companies of Weiqiao Group in HK - China Hongqiao and Weiqiao Textile. Weiqiao Group speculated that the direct cause of this action began in 2015, Weiqiao Group Baoshan completed bauxite mine construction and put into production in Guinea, Africa. After the mine was put into operation, Alcoa, Rio Tinto soon lost its raw material pricing decising power , directly hiting its business interests.
Weiqiao Group, said the short action began in November 2016, and maliciously use the Hong Kong stock market rules and international accounting standards, through anonymous tip-off and providing misleading information, forcing the auditor of the Weiqiao Group, Ernst & Young, to take an extremely conservative and cautious attitude during the 2016 annual auditing. If the United States short action is not interfered, Weiqiao Group's two listed companies will not be able to complete the annual audit work tiely, and will be investigated by the Hong Kong Securities and Futures Commission, leading to long-term suspension and normal production will not be continued.
Weiqiao Group forms textile and aluminum industry cluster,covering the whole industry chain, having more than 2,000 companies, the integrated annual output value is more than 500 billion yuan, providing job positions for nearly 30 Million people (including Weiqiao Group's 160,000 staff, more than 10 million employees in upstream and downstream), contributing more than half of the GDP for inner Binzhou.
Weiqiao Group said that once the short power achieves the above objectives,the whole aluminum production patterns will be changed, and from the industry point , the biggest beneficiaries are the United States Aluminum and other US companies. The impact on the local companies are:
1) the local two major industrial clusters will receive a fatal blow, leading a direct impact on China's 10% textile market and 20% aluminum market, raw material pricing decision power will be fell in the hand of US companies like Alcoa, Rio Tinto.
2) the two major industrial clusters directly involvs more than 200 billion of domestic bank loans, which wll lead to regional systemic financial risks.
3) The two major industrial clusters involved 30 million people's employment problem (including Weiqiao Group's 160,000 employees)t, it will lead to severe social unrest once the risk spreads.
Emerson questioned the three financial problems of China's Hongqiao in the short selling report: First, China's Hongqiao profitability rate is much higher than the average industry level from 2010, the high growth rate is not normal The Second, China's Hongqiao purchases electricity below the cost from an independent third party, which received 1.9 billion in subsidies. Third, China's Hongqiao debt is too high, deposits and other monetary funds may not exist. Therefore, China Hongqiao fraud action is not sustainable, because its debt has reached 53.9 billion yuan, accounting for 149% of the shares.
After Emerson issued its short selling report, the stock price fell by 9.2%, soon suspension, with 7.15 Hong Kong dollars before suspension, down 8.3%. On March 7, China Hongqiao resumpted trading, fell by 9.3%, and accompanied by days trading. On March 22 it was again suspended, and not resumed trading yet. According to SMM ,China's Hongqiao electrolytic aluminum, alumina and other production is not affected currently. SMM will follow up on progress and make timely reports.
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