Stocks with small capitalization in the Hong Kong’s market took a series of nose-dives today
Bloomberg reports that over $1.4 billion was expunged from the value of five small-cap companies. The publication noted two of the companies with big losses. Sino Haijing Holdings Ltd. lost 93%. And Beijing Gas Blue Sky Holdings Ltd. dropped 71%.
Holy crap...— Joe Weisenthal (@TheStalwart) November 15, 2018
"A string of Hong Kong stocks suddenly plunged Thursday with no explanation"
"More than $1.6 billion was wiped from the value of six small-cap stocks, with Sino Haijing Holdings Ltd. at one point plunging 93 percent"https://t.co/gFjcsKQIJF
Concentrated ownership and complicated holding structures over various stocks are said to be the reason for Hong Kong’s market volatility, with some calling for a tighter corporate governance.
Speculation of an Obligatory Sell-off
Without any known explanation to this sudden downfall, traders hypothesized that the fall was due to a forced sell-off.
In Hong Kong’s exchange rules, a shareholder can borrow against a stock on a condition that it is solely for personal financial reasons; not loans, guarantees or support for the company.
There is also alarm in Mainland China caused by bubbling share pledges on account of obligatory stocks sell-off as investors did not meet full collateral requirements.