Hanergy stock price soars 46 percent during two sessions

Environmental protection-related stocks have enjoyed a dramatic growth recently, according to China Securities Journal (cs.com.cn). Hanergy Thin Film Power Group (Stock code: 0566), the leading share of the Shanghai-Hong Kong Stock Connect, witnessed a 46.3 percent stock price rise during the "two sessions" this year, which was held from March 3-15.

Hanergy's share price closed at 6.61 HKD ($0.85) on March 13. Despite being much lower than the peak price (9.07 HKD) the week before, the overall stock price maintained an increase of 135 percent since the beginning of 2015.

Arbitrary bank notification

On March 9, a woman surnamed Cen received a phone call from a staff member from a British bank in Hong Kong. She was told that the stock mortgage rate of over 10 million shares of Hanergy stock (0566.HK) she had pledged to the bank had been reduced to zero and that the outstanding amount needed to be made up as soon as possible. The reason for the reduction in mortgage rate was due to the excessively rapid rise in the Hanergy stock price and underlying high risks in the long term.

Cen paid no attention to the unusual notification at first. On March 11, she received another call from the bank, saying that it had been informed by its risk-control headquarters in Singapore that the mortgage rates of some of her other stocks with steady development potential had also been decreased to zero. In addition, Cen was told that she had to replenish collateral or pay off the debt within one day, otherwise the bank would enforce the unilateral selling of her pledged stocks, including Hanergy stocks.

"My three stocks with rising collateral values are doing quite well. Besides, even if the bank compels a loan repayment, only one day is too short," Cen said. She also told the China Securities Journal reporter that some of her friends who also have stock collateral loans in the aforementioned bank have encountered similar situations. They were told that the mortgage rate of Hanergy stock had fallen to zero and were asked to cover positions. Cen said that they have already made complaints to the head office of the British bank, and they may also use legal measures to protect their rights and interests.

This kind of practice was not normal, according to a market participant who is very familiar with the stock loan procedures of banks. Under normal circumstances, it is impossible for a bank to lower the mortgage rate to zero, while clients’ pledged stock price is rising. He said that normally a bank loans 40 percent of the market value of the pledged stock. Generally speaking, only when the pledged stock is suspended, would its mortgage rate decrease to zero. Even in the case of sudden decline of mortgage rate, the rate ranges generally from 70 percent to 20 percent.