China's Kangmei Pharma sinks by daily limit as watchdog accuses it of fraud

  • Kangmei
  • Tuesday, 21 May 2019

SINGAPORE: Shares in Chinese drugmaker Kangmei Pharmaceutical Co, a constituent of MSCI's global indexes, fell by their daily limit of 5% on Tuesday after China's securities regulator accused it of faking reports and a risk alert was put on the stock.

Shanghai-listed Kangmei, which in April said an "accounting error" had led it to overstate cash in 2017 by 29.94 billion yuan ($4.3 billion), was given an alert tag by the stock exchange indicating it was at risk of being de-listed.

Kangmei's 5.33% exchange-traded bond due 2022 also fell to a low of 29.01 yuan on Tuesday, from a close of 32.25 yuan on Monday. Kangmei has 12 outstanding bonds worth a total of 17.65 billion yuan, according to Refinitiv data.

The China Securities Regulatory Commission (CSRC) said late on Friday it had uncovered "major falsehood" in Kangmei's financial reports disclosed between 2016 and 2018, including suspected violations of securities law.

The CSRC accused Kangmei of using fake bank bills to inflate deposit figures, falsifying reported revenue, and transferring funds into connected parties' accounts to trade its own stock.

Kangmei's shares have dropped 40% in the 12 trading days since it revealed the cash overstatement on April 30.

Calls to Kangmei's investor relations department went unanswered.

Weak governance has long been a black mark against mainland Chinese companies and the Kangmei case has sparked calls for tougher oversight and stiffer punishments. - Reuters

Kangmei , accounting error , overstate cash


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