Shares of Shanghai Jahwa slump after CSRC launches probe

Shares of cosmetic maker Shanghai Jahwa United Co slumped by 5.35 percent on Thursday after China's securities regulator launched an investigation into the company.

The China Securities Regulatory Commission (CSRC) has decided to launch an investigation into Shanghai Jawha, because the company failed to disclose information in accordance with CSRC's rules, Shanghai Jawha said in a statement filed to the Shanghai Stock Exchange late Wednesday.

In another statement also released Wednesday, Shanghai Jahwa said CSRC's Shanghai bureau is requiring the company to roll out rectification measures, as the listed company failed to disclose information on its transactions with Hujiang Household Chemicals Factory between April 2008 and July 2013.

The investigation came just five days after Xie Wenjian, former CEO of Johnson & Johnson Medical (China). became Shanghai Jawha's new chairman following former chairman Ge Wenyao's resignation in September, raising concerns about the company's prospects.

Shanghai Jawha should release more detailed information on the transactions to stabilize market confidence, Ge said on its Sina Weibo account on Thursday.

"Ge's resignation signaled an end to long disputes between the company's management and its major shareholder Ping An Trust. The investigation might help the new management team solve legacy problems," Shen Meng, president of investment banking firm Chanson Capital, told the Global Times Thursday.

Ping An Trust bought Shanghai Jahwa Group, the parent company of listed Shanghai Jawha, in a deal valued at 5.1 billion yuan in November 2011. On May 13 this year, shareholders of Shanghai Jahwa Group made a decision to dismiss Ge from the post of chairman of the group, as Ping An Trust claimed some group executives had been involved in embezzlement, but kept Ge's position as chairman of the listed unit.

Ge claimed later that "Jahwa Group is suffering from a political disturbance" and "Ping An has continually sold assets of Jahwa after the acquisition." He finally applied for retirement as chairman of the listed unit in September.

"Ge had worked for Shanghai Jawha for nearly three decades and helped build a premium cosmetic brand Herborist that can rival foreign brands, although he retired, his influence on the company can not be neglected," Feng Jianjun, a cosmetics marketing expert at China Brand Research Institute, told the Global Times Thursday.

"With 13 years' experience in a multinational company, Xie's appointment will push forward Shanghai Jawha's international strategy, but the new chairman will still face some challenges in adapting his management style into the company with a long State-owned history," he said.

Shen said the investigation is also part of CSRC's efforts to increase listed companies' information disclosure and transparency.

In an unrelated case, CSRC's Heilongjiang bureau has ordered Heilongjiang Agriculture Co to dismiss its general manager Ding Xiaofeng, since he assumed major responsibility for the company's illegal lending and also failed to disclose information on this lending, the company said in a statement on Wednesday.