The Chinese tycoon behind a company that was implicated in an insider-trading investigation in the US is one of China’s richest entrepreneurs, having first built his wealth in construction materials and real estate during the 1990s housing boom.
But the fortunes of Zhang Zhirong, 43 years old and ranked 22nd on Forbes’s China wealth list last year, have fallen sharply since 2011 as the shares of the two Hong Kong-listed companies he controls, China Rongsheng Heavy Industries Group Holdings Ltd and Glorious Property Holdings Ltd, 0845.HK -9.32 percent plummeted amid oversupply in the world’s bulk-shipping market and a downturn in the Chinese property market. According to Forbes, Zhang’s fortune fell by around 50 percent to about $2.6 billion in March from a year earlier.
On Friday, the US Securities and Exchange Commission accused Hong Kong-based Well Advantage Ltd – owned by Zhang – of insider trading ahead of the public disclosure that Chinese state-owned oil company Cnooc Ltd CEO -0.77 percent plans to acquire US-listed Canadian energy producer Nexen Inc. NXY -0.89 percent for $15.1 billion.
Glorious Property Holdings said Monday it doesn’t expect an insider-dealing probe by the SEC against Well Advantage to affect the Hong Kong-listed firm’s business.
Zhang and Well Advantage couldn’t be reached for comment over the weekend. Hong Kong’s Securities and Futures Commission declined to comment.
The US regulator alleged that Well Advantage and “other unknown traders” used accounts in Hong Kong and Singapore to stockpile Nexen shares based on confidential information about the deal.
The SEC alleged that Well Advantage bought more than 830,000 shares of Nexen on July 19, four days before the Cnooc deal was announced, resulting in an unrealised gain of $7 million on Nexen’s closing price on the day of the announcement. The “other unknown traders” used accounts in Singapore to buy more than 676,000 shares in the days before the announcement, and immediately sold nearly all of the stock for a profit of nearly $6 million, the SEC alleged. The agency said the complaint was filed in federal court in New York City.
Nexen shares surged immediately after the deal was announced. The stock, which closed at $25.81 on Friday, has gained 51 percent since the market closed on July 20.
The SEC in its statement didn’t accuse Zhang of any wrongdoing; the regulator said that according to media reports Zhang controls another company that has a “strategic cooperation agreement” with Cnooc.
Rongsheng Heavy, which is China’s biggest non-state-owned shipbuilder by order book and which Zhang co-founded in 2005, signed its first offshore engineering contract with Cnooc to build a 3,000-metre deepwater pipe-laying-crane vessel for the offshore oil producer, delivered in 2011. The two companies also signed a strategic-cooperation agreement in 2010, according to Rongsheng’s annual report that year.
Zhang amassed his wealth in the construction-materials trading and subcontracting businesses in the early 1990s, before investing in real estate, later listing his Shanghai-based Glorious Property in 2009, according to Glorious Property’s website. Zhang, who is ranked Shanghai’s third-richest person on the Hurun 2012 Shanghai Rich List, further diversified his business when he set up Rongsheng Heavy.
Listed in 2010, the Shanghai-based shipbuilder has manufacturing sites in Zhang’s native Jiangsu province as well as in the province of Anhui. The company has sought to move beyond dry-bulk and container ships to liquefied-natural-gas carriers and large-scale offshore engineering equipment in a bid to weather the downturn in global trade and reduced Chinese demand for commodities.
An official at Rongsheng Heavy said Saturday that because the SEC’s filing involves the private affairs of a nonexecutive director – Zhang is the nonexecutive chair – it isn’t appropriate for the company to comment. The official said Rongsheng’s businesses are unaffected by the SEC probe and its operations are normal.
Rongsheng’s shares were down 18 percent Monday at 1.15 Hong Kong dollars (15 US cents) a share, compared with HK$8 when it listed in November 2010.
Glorious Property’s shares were down 13 percent on Monday at HK$1.15, down from its initial public offering price of HK$4.40.
Category: Hong Kong