HONG KONG: The fate of PCCW's privatization now hangs in uncertainty as the Securities and Futures Commission (SFC) has stepped in to make inquiries into allegations of improper share transfers by the company.

The market watchdog confirmed that it had staff monitor the voting procedure at PCCW's shareholder meeting Wednesday. Voting records are also being reviewed.

But an SFC spokesperson refused to comment further on the investigation.

Although 75 percent of shareholders present at the meeting approved the HK$15.9 billion buyout bid, stock activist David Webb told China Daily that the result of the privatization could be overturned if the SFC finds evidence of vote rigging.

In light of the narrow gap (549 ballots) between the affirmative votes and negative votes, Webb urged the watchdog to look into the matter, including the identities of the voters, the number of shares they owned and their share-buying records in recent months.

Shares of PCCW remained suspended from trading yesterday.

The privatization is scheduled to be reviewed by the High Court on Feb 24, and PCCW would delist the next day.

About 10 PCCW minority shareholders also presented petitions to the SFC, asking for an investigation into the allegations.

Legislative Council member Starry Lee said that the minority shareholders asked the SFC to complete the investigation prior to the High Court hearing or to postpone the hearing.

One of the shareholders, surnamed Chan, said he has already prepared himself for the worst regarding the outcome. But he said he hopes the financial secretary will intervene to examine the incident.

Morgan Stanley yesterday downgraded the target price of PCCW from HK$5.30 to HK$4.50. It noted that the market has raised concerns about whether the privatization will be postponed.

However, Citigroup raised the target price of the carrier from HK$3.85 to HK$4.50, calling the market speculation baseless.

Raymond So, an associate professor at the Chinese University of Hong Kong, said that vote rigging has happened before with other companies, so he wouldn't rule out the possibility that PCCW's privatization plan could similarly fall through.

"Shareholders of Evergo China voted in favor of privatizing its affiliate Chinese Estate Holdings in 1991, but the authority nullified the result on suspicion of vote manipulation," he said.

(HK Edition 02/06/2009 page2)