World’s Top-Performing Stock Suspended After Mysterious Gain
China Ding Yi Feng’s share surge came despite years of losses.
(Bloomberg) -- One of the world’s most perplexing stock rallies came to a halt on Friday after Hong Kong’s securities regulator suspended trading in China Ding Yi Feng Holdings Ltd., the obscure investment firm whose 8,500 percent surge over the past five years has baffled analysts.
The regulator’s reasons for halting DYF weren’t immediately clear, but scrutiny of the company has intensified in recent months. In February, Hong Kong market veterans questioned the sustainability of the surge that turned DYF into the best performer in the MSCI All-Country World Index. Their comments followed several critical reports by Chinese media on DYF Chairman Sui Guangyi, a Taoist scholar who has overseen lackluster results at DYF while touting investing skills on par with those of Warren Buffett and George Soros.
Spokesmen for the SFC and Hong Kong Exchanges & Clearing Ltd. declined to comment. A DYF spokeswoman said she couldn’t immediately comment.
DYF’s surge added to a long list of extreme, unexplained stock swings in Hong Kong that have threatened to dent the city’s reputation as one of the world’s premier financial hubs. The stock’s suspension puts a spotlight on MSCI Inc.’s decision to add DYF to its global benchmark indexes in November, a move that prompted emerging market index-tracker funds run by BlackRock Inc., Vanguard Group Inc. and Northern Trust Corp. to become some of DYF’s biggest shareholders.
Critics of MSCI’s decision, including former HKEX director David Webb, have said the index compiler should do more to vet companies before adding them to equity gauges that serve as benchmarks for investors overseeing trillions of dollars. MSCI, which uses quantitative criteria such as market value and trading volume to construct its global indexes, has said the gauges are designed to represent the “investment opportunity set” without making any “subjective assessments” of constituent companies.
MSCI and Hang Seng Indexes Co. Ltd., which included DYF in its Composite LargeCap & MidCap Index in February, can remove stocks from benchmark gauges because of a trading suspension, according to rules on the two firms’ websites. Representatives for Hang Seng didn’t reply to a request seeking comment, while MSCI didn’t comment on DYF.
Bloomberg LP, the parent company of Bloomberg News, competes with MSCI and others by compiling indexes and providing analytics for stocks, bonds and commodities.
Smartac Group China Holdings Ltd., a Hong Kong-listed stock that DYF reported holding at the end of last year, tumbled 44 percent on Friday.
To contact Bloomberg News staff for this story: Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net;Evelyn Yu in Shanghai at yyu263@bloomberg.net
To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Michael Patterson
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With assistance from Bloomberg