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U.S. Short Seller Eyes China PICC P&C in a Trademark Case

09-03 16:35 Caijing
Chinese companies have been particular vulnerable to foreign short-selling in recent years.

A Wall Street short seller has targeted PICC Property and Casualty (PICC P&C) as its prey at a time when the Hong Kong-listed insurer is sued for alleged infringement of trademark in one of its products, and when its parent company is eying an initial Hong Kong debut.

The amount involved in the case may reach as much as 120 billion yuan, the largest trade mark case in mainland China so far.

The short seller, which has frequently attacked Chinese companies, reached out to Dalian Xingtai and offered to cooperate with the smaller insurance insurer to profit from short selling PICC P&C, people familiar with the matter told Capital Week, when Dalian Xingtai the compliant to a local court in the coastal city of Dalian in northeast China as early as this spring that the trademark of "through train" it registered and put into use in 2003 was infringed by PICC P&C.

The short seller said they could short PICC P&G on the grounds that the insurer failed to disclose adverse information, the source said. The proposal has already been rejected by Dalian Xingtai and its proxy, the source added, citing the fact they would not "collaborate" with U.S. short seller and engage in misdoings to harm the interest of investors.

The source did not specify the U.S. short seller but Chinese companies have been particular vulnerable to foreign short-selling in recent years.

Citron Research last week published a report raising questions about a Chinese technology firm, Qihoo 360, in its seventh attempt to short the company so far. News that Muddy Waters Research is hiring investigative journalists in finance in China has also triggered speculations that Chinese stock hunter now turn to yuan-denominated shares in the Chinese mainland.

PICC P&C is one of the most profitable among dozens of subsidiaries of PICC, its parent company, who is also mulling to float its shares in Hong Kong stock market. Net profit of PICC P&C was 8 billion yuan in 2011, and its original premium income was 173 billion in the year, public data showed.

PICC's Hong Kong IPO was slated for mid-July but was delayed in a June's company statement, citing multiple reasons.

Although Hong Kong security regulator does not prohibit a parent company and its subsidiaries from listing in the same stock market, it would indeed raise problems of potential conflict of interests between public shareholders from PICC and PICC P&C when it comes to the use of financing, if the former finally makes it.

For more about the trade mark dispute between PICC P&C and Dalian Xingtai, please turn to http://stock.caijing.com.cn/2012-09-03/112100982.html

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