It was a rough day for Hong Kong-listed China Jicheng Holdings Ltd.
Those who were trading during China’s 2015 stock market “miracle” which transformed hordes of bored Chinese housewives into leveraged day traders might remember Jicheng by its former name: Jicheng Umbrella Holdings LTD.
That’s right, it’s an umbrella company and at one point it was rising so fast that people started printing headlines like this one, from the Epoch Times, dated June 9, 2015:
Well, in what I assume was an effort to cut down on the jokes, Jicheng dropped the word “umbrella” from its name later that summer. Here’s the press release:
In the company’s own words, China Jicheng “is a top quality POE and Nylon umbrella manufacturer,” and according to its official website, its umbrellas “have already been well-accepted by clients around the world, especially those from Japan.”
One thing that is no longer “well accepted” is the company’s stock, which plunged a staggering 94.29% today:
As Bloomberg notes, Jicheng was one of “a string of Hong Kong stocks [that] suddenly plunged Tuesday, [as] seventeen firms tumbled by more than 40 percent at the close, losing a combined HK$47.8 billion ($6.1 billion) in market value.”
The culprit: links between the companies and a brokerage that’s under regulatory investigation.
Specifically, we’re talking about Lerado Financial Group (which was halted by Hong Kong’s securities regulator this month), which was an investor in China Jicheng and its umbrellas.
“We’re seeing a domino effect; all the companies in the same network got cut,” said Francis Lun, the Hong Kong-based chief executive officer of Geo Securities Ltd. “These shares are owned by the same group of people so they must be experiencing a liquidity crunch and they don’t have the money to support the share prices,” he said.
Right. It’s a “liquidity crunch.”
Unfortunately for investors, “top quality POE and Nylon umbrellas” only work when there’s too much “liquidity.”
Umbrellas are kind of useless on dry days.