BIZCHINA / Pan Gang
Investors react to Yili scandal
By Dai Yan (China Daily)
Updated: 2004-12-23 14:31
Shares of Yili Group, one of China's largest dairy producers, edged up
0.5 per cent yesterday after they resumed trading yesterday morning.
The shares initially plunged their 10 per cent daily limit to 8.78 yuan
(US$1.07) in early trade, but they finally ended up 0.5 per cent to 9.82
yuan (US$1.19).
Trade was resumed from 10:30 am Beijing time after the company issued a
statement about top executives' detention yesterday morning.
The statement confirmed that police had detained five top executives for
suspected embezzlement.
A Yili spokesman told China Daily on Tuesday that three officials had
been detained, identifying them as Zheng Junhuai, Yili's chairman; Zhang
Xianzhu, its board secretary and chief financial officer and Li Yongping,
head of its securities department.
The new list included Yang Guiqin, vice-chairman of the company board,
and Guo Shunxi, a board director.
The statement said an emergency meeting has appointed Vice-Chairman Li
Yunqing to assume the duties of the detained chairman and to be
responsible for the board operation.
Company President Pan Gang is taking care of the company's daily
operations and all departments continue to operate normally, the
statement said.
"The company is well-prepared for the peak season," the statement said.
And Chen Yan, the company spokesman, said the detention would not affect
the company's performance.
Shares of Yili were suspended from trading on Monday by the Shanghai
Stock Exchange as the company failed to issue formal comments on reports
about the detention.
Newspapers said Monday that seven Yili executives were detained on
suspicion of embezzlement and other economic crimes.
Its shares fell by their 10-per-cent daily limit to 9.77 yuan (US$1.17)
on Monday, and helped push markets down 1.2 per cent, the lowest close
since September 13.
The suspension continued on Tuesday.
But the market will shrug off the Yili impact soon.
The benchmark Shanghai composite index, which groups foreign currency B
shares and local currency A shares, was flat on Tuesday and jumped 2.5
per cent to 1,307.57 points.
Zhu Weihua, an analyst from China Merchant Securities, said he expected
the Yili scandal would have an effect on the market.
The company's shares are regarded as bluechip and invite many
institutional investors.
According to financial data released by the group, Yili has far
outperformed the industry average and other listed Chinese dairy makers.
It reported earnings per share of 0.39 yuan (4.74 US cents) for the first
half of 2004 ended June 30, compared to 0.07 yuan (0.85 cents) of Beijing
Sanyuan and 0.14 yuan (1.7 US cents) of Shanghai Bright, two major rivals
of Yili.
The Shanghai Securities News said in a report on Tuesday that the
detention is related to Yili's huge losses in bonds dealing.
The company has invested 417 million yuan (US$50.4 million) to trade
government bonds since November 2002.
(For more biz stories, please visit Industry Updates)
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