April 26, 2024

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[THE INVESTOR] China Ocean Resources, the only Chinese firm listed on the nation’s main bourse KOSPI, is on the verge of delisting after its auditor again refused to sign off the accounts citing irregularities by its CEO.

Shinhan Accounting on Aug. 7 said it could not conduct an audit amid allegations that the CEO Zhang Huoli issued fabricated disclosures to enable his friends to purchase stocks at lower prices. 

This is its second audit disclaimer following its first refusal in April. At the time, the auditor said it had not receive any documentary evidence to support the company’s cash flow and other financial details.

Industry sources said it now seems unavoidable for the Chinese fisheries firm to avoid delisting.

Its shares have already been suspended from trading since April 4 following a disclosure inquiry into market rumors that it could face a disclaimer audit opinion. On the last trading day, the stocks closed at 1,000 won (US$0.87).

“This company should have been kicked out three years ago,” said an investor surnamed Cho who claims he suffered losses of about 50 million won.
“The regulator shouldn’t have let unqualified companies like China Ocean Resources and Wanli to be listed here.”

Wanli International Holdings, a Chinese tile firm listed on the secondary KOSDAQ, is also facing delisting after it received a disclaimer audit opinion in April.

With two Chinese companies on the verge of delisting, the country’s bourse operator recently warned investment banks to be careful about listing Chinese companies.

“IPOs of Chinese firms have been important for both KRX and investment banks,” said an industry source who asked to remain anonymous. “But the bourse operator is turning away from Chinese companies and so are investors’ sentiment.”

In 2016, six out of seven overseas companies listed in Korea were Chinese companies and experts predicted the trend would continue with a dozen more expected to go public here.

However, this year would see listing by at most three Chinese companies, market experts said.

Initial offerings by Coloray International Investment, the first Chinese company to go public in Korea this year, were undersubscribed during a two-day subscription period for retail investors last month.

China Ocean Resources made its stock debut on KOSPI in 2009. The company has been pulled up in the past for false disclosures about its financial status. Its share price tumbled after trading was suspended for more than three months last year.

By Park Ga-young (gypark@heraldcorp.com)