Mainland investors risk losing all their money following the enforced suspension in the trading of Hanergy Thin Film Power Group Ltd stocks after two major stock indexes decided to remove the solar-energy company from their Chinese mainland-related indexes.

The removal could lead to the company's delisting, analysts say.

Both the FTSE Index and the Hang Seng Index announced that Hanergy would be deleted from their index families.

Hanergy had refused to disclose details of its financial situation as well as those of its chairman in the Securities and Futures Commission's investigation. Photo / IC

Data from China Securities Depository and Clearing Corp Ltd show that mainland individual investors hold 660 million shares of the solar film maker's stocks through the Shanghai-Hong Kong Stock Connect program, worth HK$2.6 billion.

Wang Haisheng, an energy analyst with Huatai United Securities Co Ltd, described the enforced suspension as highly unusual. "There had only been a few such cases in recent years. Only one company survived after a probe by Hong Kong's securities regulator."

On July 15, the SAR's Securities and Futures Commission (SFC) urged Hanergy to stop trading its stocks. It came after the company had halted trading of its own stocks for almost 2 months following a 47-percent plunge in its share price on May 20 - from HK$7.35 to HK$3.91.

Hanergy's share price had tripled from November 2014 to May 2015, making its chairman Li Hejun the mainland's richest man last year. It used to be a star in the market and one of the most popular Hong Kong-listed stocks among mainland investors.

The SFC said Hanergy had refused to disclose details of its financial situation as well as those of its chairman.

Hanergy's parent company Hanergy Group Holding Ltd has a 73-percent stake in the listed subsidiary. Its financial reports show that most of the company's revenue during the past five years had come from the sale of products to its parent company.

Wang says the market has been skeptical about Hanergy's gross profit for some time. "It claimed that its gross profit ratio reached 80 percent, which was three or four times higher than that of other companies in the same industry."

Investors also worry about the company's ability to repay its loans. Hanergy has opened nine factories on the mainland, but its output is hardly seen in the market, according to an earlier report by CLSA analyst Charles Yonts.

Hanergy told the SFC on Friday that the company cannot hand over documents concerning its parent company's internal affairs, as well as Li's personal financial situation, as requested.

A China Business News report said the over-the-counter (OTC) price of Hanergy's shares had once dived by more than 80 percent in the past two months. International institutions, such as Guggenheim Investments and Standard Chartered Securities, had managed to sell out or significantly reduced their stakes in Hanergy. But now with the enforced trading suspension in place, even OTC trade is not available.

benyue@chinadaily.com.cn

(HK Edition 07/21/2015 page8)