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Nikkei Markets

ArtGo's Hong Kong shares crash after MSCI reverses inclusion

Trading halted after 98% drop

HONG KONG (Nikkei Markets) -- Trading in the shares of marble miner ArtGo Holdings was halted on Thursday after they crashed 98%, erasing all of their gains over the past year and more, following index compiler MSCI's decision to reverse a planned inclusion in its equity benchmarks.

The stock collapsed more than 98% from its closing price on Wednesday, erasing nearly HK$45 billion ($5.85 billion) in market value, before trading was suspended. It was last at 30.5 Hong Kong cents, down from its closing level of HK$14.80 the previous day. Nearly HK$570 million worth of shares had changed hands before the trading halt.

The sharp moves followed a statement Wednesday by MSCI that contrary to its announcement on Nov. 7, the index compiler will not be adding ArtGo shares to its benchmarks as it had intended to with effect from Nov. 27, as part of a semi-annual index review. The decision followed "further analysis and feedback from market participants on investability," MSCI said.

There was no immediate response to an emailed request for comment sent to the company.

MSCI's Nov. 7 decision had come under criticism in certain quarters. David Webb, an activist investor, had in a note on his website in September highlighted the contrast between ArtGo's share performance and its reported financial results.

In a note on Nov. 8, following MSCI's announcement, Webb wrote: "Congratulations MSCI, you've just made it easier for active stock-pickers to outperform your mindless index by excluding ArtGo from their holdings, unless the SFC intervenes before the end of Nov. 26." He was referring to Hong Kong's market regulator, Securities & Futures Commission.

ArtGo had in August reported a net loss of 28.8 million yuan ($4.1 million) for the half year ended Jun. 30, narrower than the loss of 40.7 million it reported for the year-earlier period. Its revenue more than halved to 47.9 million yuan during the first half this year.

"The exclusion from the index itself is negative news to any stock, but the drop we see in ArtGo has probably got some other reasons specific to the stock," said Steven Wong, an investment analyst at Harris Fraser Group.

Thursday's collapse follows a period of superlative gains, which saw ArtGo's shares surge more than 3,700% over the past year. The stock had more than doubled in value from its closing price of HK$6.50 on Nov. 7 through Wednesday, following MSCI's plan to include the company in its indexes.

--Benny Kung

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