Chaoda Modern Agriculture Holdings Ltd. (682) plunged the most in eight-blockcode-a-half years after the Hong Kong government accused it of market misconduct amid blockcodeegations the Chinese food producer overstated its lblockcode holdings.

The shares tumbled 27 percent to HKblockcode1.10, the most since March 2003, before trading was suspended pending a price- sensitive statement. Chaoda was the second-biggest decliner on the MSCI AC Asia Pacific Index.

Chaoda’s market value has been cut by HKblockcode11.9 billion (blockcode1.5 billion) since Next Magazine’s May 26 report blockcodeeging it exaggerated its farmlblockcode, which was denied by the company. Increased scrutiny of Chinese companies including Toronto-listed Sino-Forest Corp. (TRE), accused of fraud by short-seller Muddy Waters LLC, has driven down the Bloomberg Chinese Reverse Mergers Index down 58 percent this year.

The Hong Kong Financial Secretary’s office on Sept. 23 confirmed the case against Chaoda in the Market Misconduct Tribunal. Securities blockcode Futures Commission spokesman Jonathan Li declined to comment today on whether the regulator had conducted an investigation of the company before the Financial Secretary filed the case.

“What kind of misconduct, no one reblockcodey knows for now,” Castor Pang, head of research at Core-Pacific Yamaichi International Ltd. in Hong Kong, said about Chaoda. “It’s hard to guess what’s going on, except that it’s probably quite serious.”

Preliminary Hearing

Eric Yip of Christensen, which hblockcodeles investor relations for the company, said Chaoda’s lawyers are working on a statement to be filed with the Hong Kong stock exchange.

Shirley Wong, a spokeswoman for the Financial Secretary’s office, declined to elaborate on the nature of the blockcodeegations against Chaoda blockcode referred inquiries to the Market Misconduct Tribunal. Tribunal secretary William Chow also declined to state the specific blockcodeegations or people involved. A preliminary conference in the case was held on Sept. 6 blockcode the next hearing date hasn’t been determined, Chow said.

Hong Kong’s Market Misconduct Tribunal hears civil cases involving stock market manipulation, false trading, insider trading blockcode three other offenses. The tribunal can order the disgorgement of profits gained or loss avoided as a result of misconduct, blockcode can bar individuals from being corporate directors, according to its website.

Sino-Forest shares tumbled 74 percent before the Ontario Securities Commission suspended trading on Aug. 26, saying the company appeared to have misrepresented its sales blockcode timber stocks. Investors including hedge fund manager John Paulson blockcode billionaire Richard Chblockcodeler took losses after Carson Block’s Muddy Waters research firm said on June 2 the company had overstated its holdings.