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This Chinese Blood Stock Lost $9 Billion in Just 10 Days

(Bloomberg) -- Even by the standards set in China’s slumping stock market this year, this is extreme.

Shanghai RAAS Blood Products Co., which manufactures and develops human blood products, resumed trading this month following a suspension in February pending what the company referred to as a "major restructuring." Its shares have plunged by their 10 percent daily limit for 10 consecutive sessions, losing 63.2 billion yuan ($9.2 billion) in value.

It has been bitten by China’s roughly $2 trillion equity market decline this year. Shanghai RAAS’ tumble has triggered margin calls on shares that have been pledged as collateral for loans, sending it further into a spiral.

This Chinese Blood Stock Lost $9 Billion in Just 10 Days

"Investors are fleeing after RAAS resumed trading, triggering margin calls, which have only created more panic selling," said Lv Changshun, fund manager at Beijing Dajun Zhimeng Investment Management Co.

Shenzhen-listed Shanghai RAAS said in January 2015 it would begin investing in stocks, after the Shanghai Composite surged 21 percent the previous month. This year’s decline, in which the index has plunged about 23 percent, has dealt a heavy blow to its equity holdings.

It accrued losses of nearly 900 million yuan from securities investments alone in the first nine months of this year, compared to a 100 million yuan profit a year earlier, the company disclosed in its third quarter earnings. Shanghai RAAS said that "fluctuations in the capital market" were the main reason for the firm’s net loss of nearly 1.3 billion yuan in the first nine months.

"If the company’s stock market investments were made with money from share pledging, that only makes matters worse," said Lv. "If no measures are taken, the bleeding will not stop by itself."

In a reply to investor queries on a disclosure platform Wednesday, Shanghai RAAS acknowledged that controlling stakeholders’ "stock pledging loans have defaulted and may result in forced sales of the company’s shares."

Earlier this month the company said that 2.95 percent of its shares must be sold in the six months after Dec. 12 by three separate asset management programs, which have had to close after falling below stop-loss thresholds.

The firm’s securities representative Qiu Hong told Bloomberg Shanghai RAAS would issue a further update on its restructuring plans before Dec. 25, but declined to comment on the stock price movements.

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