MSCI Ejects Hanergy From Indexes--Update
August 27 2015 - 7:43AM
Dow Jones News
By Wayne Ma And Jacky Wong
HONG KONG--Stock-index compiler MSCI Inc. ejected a troubled
Hong Kong solar-power company from its indexes, enabling some of
the world's biggest investment managers to dispose of hundreds of
millions of dollars they have locked up in the firm's shares.
The deletion of Hanergy Thin Film Power Group Ltd., announced
Thursday, means funds that simply track MSCI's indexes of stocks
can either write down their Hanergy holdings or sell them outside a
formal exchange.
These so-called passive funds, including ones run by Vanguard
Group and BlackRock Inc., have been left holding the shares since
trading in Hanergy was suspended in May after losing half its
market value in one day. Hong Kong's securities regulator has since
extended the suspension indefinitely as it probes the finances of
the solar-equipment manufacturer and its dealings with its
privately held parent company in Beijing.
Although Hanergy's stock price has remained suspended at 3.91
Hong Kong dollars (50 U.S. cents) a share, their value dropped to
as low as HK$1.32 in over-the-counter trading in the week after the
halt, when six million shares were offloaded, according to data
from FactSet. Guggenheim Partners, which held more than 100 million
Hanergy shares as of February through its fund that tracks solar
stocks, sold off all its shares in late May after a different
underlying solar index it tracked removed Hanergy, a Guggenheim
spokesman said.
MSCI is the latest of four major index compilers -- including
the FTSE, Hang Seng and S&P -- to remove Hanergy, and its
decision is effective Sept. 1. Funds holding the shares will first
need to find a buyer. Whether the funds have lost money on the
stock isn't known because it depends when they acquired shares and
the price they can get from them. They may also choose to write off
its value.
Hanergy was first included on MSCI indexes in 2012, when it
hovered around 20 Hong Kong cents a share, but its price surged to
more than HK$9 a share earlier this year, valuing the company at
more than Sony Corp. and briefly making its owner, Li Hejun, the
richest man in China.
Retail investors, including Hanergy employees, who bought the
company's stock, may remain in limbo. Smaller shareholders can't
afford to sell privately because fees would be prohibitive,
according to Christopher Chen, an assistant professor of financial
law at Singapore Management University.
"Retail investors are usually incapable of doing these kinds of
deals," he said. "If you own just a few thousand shares, nobody
will buy them ... the costs are too high."
Hanergy, BlackRock and Vanguard didn't immediately reply to
emails seeking comment.
Hanergy plans to release its interim financial results Friday.
The company said earlier this month that it might swing to a
first-half net loss this year after it canceled billions of dollars
in deals with its parent company.
The listed unit has proposed to Hong Kong's Securities and
Futures Commission that it end all transactions with its parent to
satisfy the investigation. Hanergy Thin Film has said that the
extended suspension is "unfair and unreasonable." It later canceled
a deal to buy as much as HK$50.51 billion in solar panels from its
parent company over three years.
Its solar panels are based on so-called thin-film technology,
which has the potential for lightness and flexibility. Thin film,
which is less efficient than more-common panels based on
crystalline silicon, hasn't caught on widely.
Write to Wayne Ma at wayne.ma@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 27, 2015 07:28 ET (11:28 GMT)
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