Hong Kong stock regulator flags more companies for share concentration

Hong Kong's securities regulator has increased scrutiny on highly concentrated shareholding this year, warning about potential sharp price swings in small-cap stocks. As of August, the Securities and Futures Commission (SFC) had identified 13 cases of high shareholding concentration on the Hong Kong stock exchange, a decrease from 15 in the previous year and 10 in 2024.

In contrast, only one case was reported in 2023. The regulator's concern stems from small- and mid-cap stocks, with market values ranging between HK$600 million and HK$9 billion. Examples include Desun Real Estate Investment Services Group, where the controlling shareholder and 18 other investors held a combined 99.53% of total issued shares as of July 21.

The SFC warns that concentrated ownership can lead to significant price fluctuations even with minor trades. Analysts note that market funds and investor attention are drawn to "A plus H" listings, biotech companies, and tech leaders. While an SFC alert is not an indication of illegality, it often leads to increased volatility in stock prices.

The SFC's risk warning mechanism, established in 2009, targets stocks whose prices surge sharply over a short period. Notable examples include Desun, which saw its price jump 92.3% in July, and Transtech Optelecom Science, which experienced a 23% decline after being flagged in June. The SFC's aim is to maintain an open, transparent, and representative market by ensuring a diverse shareholder base.