By Jin Jing (China Daily)
Updated: 2007-08-07 08:49

Hangxiao Steel Structure said in a statement to the stock exchange yesterday that the 34.4 billion yuan construction project, which it was to undertake in Angola, has run into rough weather as a result of an unexpected delay.

The company's shares plunged 5.93 percent to close at 23.3 yuan when trading resumed after a one-week suspension.

Related readings:  Freeze on Hangxiao trading continues  Hangxiao suspends trading over hampered contract reports  Shareholder sues Hangxiao Special Coverage: Markets Watch

The company's statement to the Shanghai Stock Exchange said the construction of the first phase, consisting of 32 buildings (worth around 1.2 billion yuan) is under way, but it has yet to secure confirmation for the second phase.

Dispatch of additional personnel by Hangxiao to Angola was canceled and the company said it was uncertain if the project could proceed as originally planned.

"The difficulty to complete the project is within our initial expectations," said an analyst surnamed Jiang at a listed securities company.

The contract amount was about one-tenth of Angola's gross domestic product.

"We can only judge by the company's statement to the Shanghai Stock Exchange, but it seems to have created lots of doubts in the minds of investors," he added.

Trading in Hangxiao shares was suspended twice in July. In the first instance, the company announced on July 13 that the project in Angola was proceeding smoothly.

The company also said the first letter of credit of $14.3 million yuan was honored by the bank.

In March, Hangxiao announced it signed a contract worth 34.4 billion yuan with Hong Kong-based China International Fund Ltd for a construction project in Angola. Before that announcement, speculation had pushed up the company's shares by 77 percent in six days.

The China Securities Regulatory Commission said on April 4 it began an investigation into Hangxiao.

In May, the China Securities Regulatory Commission decided to fine Hangxiao 400,000 yuan, Chairman Shan Yinmu and President Zhou Jinfa 200,000 yuan each, and three other officials 100,000 each for failing to disclose the information on time.

Hangxiao released the risk warning notices on May 21, 24 and July 11 to the Shanghai Stock Exchange to announce the project processing and alert investors to the uncertainties of the project.

Twenty-two investors are suing Hangxiao, asking for compensation for the losses caused by the misleading information disclosure.