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Xinao Denies Bribery Allegations as Shares Plunge 22%

Xinao Gas Holdings Ltd., whose shares plunged as much as 22 percent in Hong Kong trading today, denied a report that the chief executive of the parent company was involved in bribery.

The allegations in an online article involving Xinao Group and Yang Yu were untrue and unfounded, the distributor of gas to more than 60 Chinese cities said in a statement to the Hong Kong stock exchange. Xinao Gas didn’t elaborate on the article.

The shares fell HK$2.16, or 11 percent, to close at HK$16.84 after losing as much as HK$4.16, the most since May 9, 2001. Xinao Gas said it’s unaware of any agreement or transaction that might have caused the drop. Lorraine Chan, a spokeswoman for the stock exchange, declined to comment.

“Investors overreacted to the rumors this morning,” said Wang Aochao, head of China research at UOB-Kay Hian Ltd. in Shanghai. “The stock began to pick up in the afternoon. I’m still bullish about the company given the increasing demand for gas in China.”

Wilson Cheng, Xinao Gas’s financial controller, declined to elaborate on the allegations involving Yang. “We just wanted to clarify they are untrue,” Cheng said by telephone.

Yang, 52, was Xinao Gas’s chief executive and executive director until his resignation from the posts in November 2008 to focus on his role as the parent company’s CEO.

Xinao Gas’s net income rose 27 percent last year on increased sales in China. The Chinese government wants to triple the use of the cleaner-burning fuel in the next decade to about 10 percent of energy consumption to reduce reliance on more polluting coal and oil.

The stock is rated a “buy” by 15 out of 17 analysts in a survey compiled by Bloomberg. Two analysts rate Xinao Gas a “hold.”

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