China Jinmao's Hong Kong Office Searched in Corruption Probe

Updated on
  • Company says that it isn’t the subject of the investigation
  • Jinmao is a state-owned builder under China’s Sinochem Group

Chinese state-backed developer China Jinmao Holdings Group Ltd. said its Hong Kong office was searched in a corruption probe.

The company’s shares fell as much as 3.3 percent in Hong Kong on Wednesday and JPMorgan Chase & Co. downgraded the stock.

Jinmao and its units are not the subject of the investigation, the company said in a filing to Hong Kong’s stock exchange, adding that Chief Financial Officer Jiang Nan was asked to visit the Independent Commission Against Corruption as part of the probe.

“Without clarity on any of the details, we believe corporate governance risk will remain high and advise investors to be cautious,” wrote JPMorgan analysts led by Ryan Li, cutting the company’s rating to neutral from overweight. The analysts lowered their December 2018 target price for the company to HK$3.80 from HK$5.10. The stock traded at HK$3.82 as of 11:44 a.m. local time, down 2.6 percent.

The real estate arm of Sinochem Group, Jinmao is a mid-sized builder, ranking 27th in China last year by sales, according to China Real Estate Information Corp. Besides developing high-end residential projects, the group owns office buildings, hotels and malls. It built the Jin Mao Tower, an iconic skyscraper in Shanghai’s Pudong district.

The investigation relates to section 9 of the Prevention of Bribery Ordinance, the firm said late Tuesday, referring to a law that covers corrupt transactions with “agents” rather than public officers. The firm is cooperating in providing documents and records, and the investigation isn’t expected to adversely affect its business, it said. A spokesman for ICAC declined to comment.

The firm’s shares have climbed more than 80 percent this year during a rally for Chinese developers.

Hong Kong’s ICAC is known for the probe that led to the jailing of Thomas Kwok, the billionaire former co-chairman of Sun Hung Kai Properties Ltd., and Rafael Hui, the city’s former chief secretary. It also handles more grassroots cases, like the bank worker bribed to give a loan or the police officer allegedly getting free massages for favors.

— With assistance by Emma Dong, Benjamin Robertson, Frederik Balfour, and Fox Hu

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