Haoyue Care lost $7.2M shorting coal futures — then the stock soared when it quit

Haoyue Personal Care (stock code 605009.SH) is a Chinese personal care products manufacturer based in Hangzhou, specialising in baby diapers, adult diapers, sanitary pads, and wet wipes. The company went public on the Shanghai Stock Exchange in September 2020 and was one of China's largest ODM manufacturers of personal hygiene products for international brands like Unilever and Kao.

In 2021, Haoyue's subsidiary Jiangsu Haoyue began investing in coal futures — coking coal and coke contracts. The company invested 153.1 million yuan (5.49% of 2020 audited net assets), taking repeated short positions. When coking coal fell 6.3% in January and coke plunged over 25%, the company doubled down. But prices reversed sharply — coking coal surged 77% and coke 40% from July — and losses mounted. Total losses reached 67.98 million yuan (11.28% of 2020 net profit), with the realised loss at 45.8 million yuan ($7.2 million).

The Shanghai Stock Exchange sent a supervision letter. Haoyue's directors and senior management publicly apologised and the salaries of those deemed responsible were cut. On 24 November 2021, the company announced it would close all futures positions, cancel its futures account, and exit the coal futures market entirely. The stock surged 10% on the announcement, even though the stock had fallen over 60% from its peak of 134 yuan earlier in the year.

The case became a textbook example of a company straying from its core business into speculative trading it had no expertise in. Haoyue's 2021 annual results showed a 39.8% decline in net profit to 363 million yuan, and revenue fell 5% year-on-year.