World’s top-performing stock halted after 8,500% gain riddle

Pedestrians walk past an electronic ticker board and screens displaying stock figures outside the Exchange Square complex, which houses the Hong Kong Stock Exchange, in Hong Kong, China. (Bloomberg)

A Hong Kong stock whose mysterious world-beating surge vaulted it from obscurity into multibillion-dollar investment funds was suspended by city’s securities regulator.

China Ding Yi Feng Holdings Ltd., the Hong Kong investment firm whose more than 8,500 percent surge over the past five years bested every other stock in the MSCI All-Country World Index, was halted by Hong Kong’s Securities and Futures Commission on Friday. A DYF spokeswoman said she couldn’t immediately comment.

While the SFC’s reasons for halting DYF weren’t immediately clear, scrutiny of the company has intensified in recent months. Hong Kong market veterans last month questioned the sustainability of the surge that turned DYF into one of the world’s most expensive publicly traded companies. The comments followed several critical reports by Chinese media on DYF Chairman Sui Guangyi, a Taoist scholar who has overseen lackluster results at DYF while touting investing skills on par with those of Warren Buffett and George Soros.

Spokesmen for the SFC and Hong Kong Exchanges & Clearing Ltd. declined to comment.

DYF’s surge added to a long list of extreme, unexplained stock swings in Hong Kong that have threatened to dent the city’s reputation as one of the world’s premier financial hubs. Its suspension puts a spotlight on MSCI Inc.’s decision to add DYF to its global benchmark indexes in November, a move that prompted emerging market index-tracker funds run by BlackRock Inc., Vanguard Group Inc. and Northern Trust Corp. to become some of DYF’s biggest shareholders.

Critics of MSCI’s decision, including former HKEX director David Webb, have said the index compiler should do more to vet companies before adding them to equity gauges that serve as benchmarks for investors overseeing trillions of dollars. MSCI, which uses quantitative criteria such as market value and trading volume to construct its global indexes, has said the gauges are designed to represent the “investment opportunity set” without making any “subjective assessments” of constituent companies.

MSCI and Hang Seng Indexes Co. Ltd., which included DYF in its Composite LargeCap & MidCap Index in February, can remove stocks from benchmarks because of a trading suspension, according to rules on the two firms’ websites. Representatives for Hang Seng didn’t reply to a request seeking comment, while MSCI didn’t comment on DYF.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.