This Chinese cement producer's market value crashed 99% in 15 minutes

By Bloomberg News

A Chinese cement producer was in the spotlight after it suspended stock trading Wednesday, following a selloff that nearly wiped out all its market value in the final 15 minutes of the previous session.
 

China Tianrui Group Cement Co. said trading in its Hong Kong-listed shares has been halted from 9 a.m. 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% to about HK$0.05 Tuesday, cutting its market capitalization to 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 such as using shares as debt collateral. The loss-making company’s woes also come at a time when an unprecedented housing crisis is causing increased stress among the country’s property developers and construction firms. 

“When there is a relatively large selling order, it is easy to trigger panic since there are not enough buyers,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong, adding that penny stocks are prone to sudden plunges given thin liquidity. “It could also come from margin calls if the major shareholder pledged the stocks.”

Tianrui’s controlling shareholder Li Liufa and his spouse jointly own approximately 70% 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% of its total, to secure a 12-month loan of up to 166.5 million yuan.

The company’s investor relations officials couldn’t be reached for comment when contacted by Bloomberg. It also didn’t immediately respond to a written request for comment. 

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 as reasons.

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.