Market calm over stocks held by Lehman
Updated: 2008-09-17 07:25
By Hui Ching-hoo(HK Edition)
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Investment bank Lehman Brothers currently holds a stake of at least 5 percent in seven Hong Kong-listed companies, whose shares saw a nosedive yesterday after Lehman Brothers filed for bankruptcy protection Monday.
According to the Hong Kong Exchanges and Clearing Ltd, the companies include Capital Strategic Investment, Greentown China Holdings, Guangzhou R&F, China Railway Group, China Primary Resources, Hong Long Holdings and Skyframe Realty.
China Primary Resources, 17.7 percent of which is held by Lehman Brothers, lost one-fourth of its share price yesterday, closing at HK$0.06.
Shares of Capital Strategic Investment plunged 11.79 percent to end at HK$0.17.
A spokesperson of Capital Strategic Investment told China Daily that the closedown of Lehman Brothers will not affect the company's operation, but he refused to comment on the stock's performance.
The Lehman Brothers turmoil sparked a knee-jerk for investors on the fear that liquidators will rush to cash in the shares to pay off their debts.
However, CIC Investor Services managing director Timothy Lo said that liquidation of the shares virtually can do very little to help the indebtedness of Lehman Brothers.
"The total value of the shares (is) only worth several billion, which is very trifle compared with the arrears Lehman Brothers owed," he said. "Indeed, disposal of shares is subjected to the United States bankruptcy code."
Lo said that prices of Lehman Brothers-held shares are inevitably facing massive downside pressure in the near future. Hong Kong Baptist University associate professor Billy Mak said that the bankruptcy code requires creditors to liquidate assets of the insolvent companies in phases lest the assets are sold at low prices.
"Compared with fixed assets such as properties, equities are easier to make cash for liquidators," he said. "However, mainland property stocks underwent a significant correction earlier. I think the creditors will not be desperate enough to sell the shares off under current circumstances."
Lehman Brother was one of the most active institutional investors in the Hong Kong market. Apart from purchasing shares, the investment bank also invested via share options.
Lehman Brothers was also actively trading shares of HSBC and Standard Chartered Bank in recent months.
(HK Edition 09/17/2008 page2)