Roving Periscope: In the fragile Chinese economy, a cement co goes bust in 15 minutes!
Virendra Pandit
New Delhi: The fragility of China’s economy on Wednesday led to a listed cement producer’s market value crashing 99 percent in just 15 minutes!
According to the media reports, China Tianrui Group Cement Co suddenly came into the spotlight when it suspended stock trading on Wednesday following a sell-off that nearly wiped out all of its market value in the final 15 minutes of the previous session.
The company said trading in its Hong Kong-listed shares was halted from 9 AM local time, pending an announcement related to inside information, according to an exchange filing.
Based in the central Henan province, Tianrui’s stock plunged 99 percent to about HK$0.05 on Tuesday, cutting its market capitalization to only HK$141 million ($18 million).
During the selloff, about 281 million shares, or a third of the firm’s free float, changed hands. Of that amount, more than 80 million shares were traded during the final few minutes of the session known as the closing auction.
Tianrui’s abrupt and dramatic stock rout is a reminder of the risks associated with obscure Chinese firms with a high concentration of shareholding and those that engage in financing practices, like using shares as debt collateral.
The loss-making company’s woes came when an unprecedented housing crisis caused increased stress among the country’s property developers and construction firms.
Tianrui’s controlling shareholder Li Liufa and his spouse jointly own approximately 70 percent of the company, according to a filing in January.
The cement producer also announced at that time that it pledged 97 million shares, or 3.3 percent of its total, to secure a 12-month loan of up to 166.5 million yuan.
Tianrui swung to a net loss of 634 million yuan ($87.7 million) last year, from a profit of 449 million yuan in 2022. It cited weak demand resulting from China’s property downturn, intensifying market competition, and high raw material costs.
Listed in Hong Kong in 2011, the company has an annual cement output capacity of about 58 million tons, with its business primarily focused on central and northern China, according to its official website. It also said its products were used in major domestic infrastructure projects such as high-speed rail lines.
