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BaWang Halts Trading After Shares Decline on Shampoo Cancer-Risk Report

BaWang International (Group) Holding Ltd., China’s largest herbal shampoo maker, halted trading after its shares fell by a record in Hong Kong on a report that two of the company’s products contain a substance that may cause cancer.

BaWang, which said today that the amounts of the substance are too small to affect human health, slid 14 percent to HK$5.05 at the noon trading break. That was the steepest decline since the shares debuted July 3, 2009. The stock was the biggest loser on the Hang Seng Composite Index, which gained 1 percent.

Samples of BaWang’s anti hair-loss formula shampoo and its Royal Wind brand endorsed by Chinese pop singer Faye Wong had 10 parts per million of 1,4-dioxane, a substance that may cause cancer, Next Magazine reported, citing test results by Hong Kong-based inspection and analysis company SGS.

BaWang said in an email that it reserves the right to take legal action against Next Magazine. The weekly declined to comment on any possible litigation. Editor-in-Chief Lee Chi-ho said by phone that a safe shampoo “must not contain any dioxane.”

The shampoo doesn’t cause any harm to humans as the amount of 1,4-dioxane it contains is very small, the magazine cited Chief Executive Wan Yuhua as saying. The substance is found in most shampoo brands, Wan told the magazine.

‘Strict Control’

“Bawang will strive for strict control over its production process,” the company said in its e-mail. The company will “further reduce residue, bringing better products to the consumer,” it said.

The U.S. Department of Health and Human Services considers 1,4-dioxane as “reasonably anticipated to be a human carcinogen,” according to its website. The Occupational Safety and Health Administration has set a limit for of 100 parts 1,4- dioxane per 1 million parts of air in the workplace.

BaWang issued a Chinese-language statement today that said its products comply with Chinese, Hong Kong, European Union and U.S. FDA standards. The levels of 1,4-dioxane contained in BaWang’s shampoos are far lower than those recommended in international safety guidelines and have no impact on human health, it said.

Calls to SGS seeking comment weren’t returned.

BaWang shares have lost 6.5 percent this year, compared with a 5.3 percent decline for the Hang Seng Composite Index. Before today’s drop, BaWang had advanced 8.9 percent since the start of the year.

The Guangzhou, southern China-based company, which raised HK$1.67 billion ($215 million) in a Hong Kong initial public offering last year, also uses action movie star Jackie Chan to promote its products.

To contact the reporter on this story: Wendy Leung in Hong Kong at wleung12@bloomberg.net

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