Chinese tech giant Lenovo Group could lose its place on Hong Kong's benchmark equity index if its shares continue to tumble as they have.
A Bloomberg report said the company's stock had fallen by 56% after being placed on the Hang Seng index in March 2013, losing US$5.8 billion in value.
Bloomberg said, according to its own calculations, companies that had been removed from the index in the last 10 years had experienced a median fall of 48% before they were dropped.
Lenovo shares hit their lowest level since 2009 on Monday, with news of a seven-year export ban on Chinese telecommunications equipment maker ZTE added to jitters about the Chinese IT sector, along with a selloff of tech stocks globally.
{loadposition sam08}The company's shares rose 0.8% on Tuesday. Lenovo stock is among the most shorted on the Hang Seng index.
“Risks that Lenovo will lose its seat are on the rise,” said Kenny Wen, a strategist at Hong Kong's Everbright Sun Hung Kai Co. “Lenovo is having trouble in all key areas, from issuing cool smartphone models to keeping market share in computer businesses. The short-sellers may have picked the right target this time.”
In a related development, Lenovo and Chinese telecommunications firms Huawei and ZTE have been classes as companies that may be pursuing the government's strategic aims in return for government support, according to a report from third part researcher Tara Beeny posted on the website of the US-China Economic and Security Review Commission.
Lenovo contested this report, saying it had numerous mistakes and said it would work with the Commission and the author to correct them.
The company, which purchased IBM's PC division and then its server division, was previously dropped from the Hang Seng index in 2006, six years after it made its debut.