Hong Kong bourse sees most short-seller attacks in 2017, prompting tightening regulation
Grant Thornton says the active short-selling activities could have a positive impact on improving Hong Kong’s market quality
Hong Kong’s listed companies were on the receiving end of the most short-seller attacks in 2017, with most of those allegedly involved in fraudulentactivities, according to global accounting giant Grant Thornton.
The unusually active short selling has prompted tighter scrutiny on initial public offerings (IPOs) and listed companies, as the Securities and Futures Commission (SFC) and the Hong Kong Exchanges & Clearing (HKEX) have taken a more active role in trying to eliminate subpar companies from the market, said Barry Tong, advisory partner at Grant Thornton.
“We’ve noticed a sharp increase in short-seller attacks against Hong Kong’s listed companies this year,” he said. “There are more negative allegation reports in the past 12 months than ever.”
Tong said they have observed a lot more new short sellers with both overseas and potentially mainland Chinese backgrounds.
Major allegations against the companies include exaggeration of financial figures, off-balance sheet arrangements, and non-disclosure of related party transactions.
The increase in short-selling activities has prompted regulators to boost scrutiny.
The SFC has adopted a new front-loaded approach in the past few months to directly intervene in serious listing matters, suspending more IPO applications that fail to meet listing conditions than in the past three years.
