BLK BlackRock Inc

By Wayne Ma And Jacky Wong 

HONG KONG-- MSCI Inc. ejected a troubled Hong Kong solar-power company from the indexes it compiles, clearing a path for some of the world's biggest asset managers to deal with investments totaling 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 seek to match the performance of MSCI's indexes of stocks can either write down their Hanergy holdings or sell them. Those funds had to hold the stock as long as it was included in the indexes.

Trading in Hanergy was suspended in May after the stock lost half of its 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.

The so-called passive investment funds, including ones run by Vanguard Group and BlackRock Inc., have been left holding the shares.

Hanergy's stock price has remained suspended at 3.91 Hong Kong dollars (50 U.S. cents) a share, but the value of the shares 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 a fund that owns solar-energy stocks, sold off all its shares in late May after a different solar-power index that the fund tracked removed Hanergy, a Guggenheim spokesman said.

MSCI is the latest of four major index compilers--the others are the FTSE, Hang Seng and Standard & Poor's--to remove Hanergy. Its decision is effective Sept. 1.

Funds that choose to dispose of the shares will first need to find a buyer for a private sale. They may also choose to write off the value of the stock.

Whether the funds have lost money on Hanergy isn't known because that depends on when they acquired shares and the price they can get for them. They may also choose to write off the value of their holdings.

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 planned 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, including an arrangement to buy as much as HK$50.51 billion in solar panels from its parent company over three years.

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, which has focused on deals between the two entities. Hanergy Thin Film has said that the extended suspension is "unfair and unreasonable."

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

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(END) Dow Jones Newswires

August 27, 2015 10:47 ET (14:47 GMT)

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