Hong Kong stock exchange protects Chinese chemical company accused of overstating profits

Hong Kong's Stock Exchange is prohibiting investors from betting against a Chinese company backed by Morgan Stanley for at least the next three months.

The protections took effect Friday. That's one day after The Associated Press reported serious discrepancies in what Tianhe (TYEN'-huh) Chemicals Group Ltd. told investors when Morgan Stanley & Co LLC, Bank of America Merrill Lynch and UBS AG took it public in June.

Barely two months after its initial offering, a shadowy investment research group tied to people betting against Tianhe's stock alleged that the company had overstated its profits.

The company disputes these allegations.

Exchange spokesman Scott Sapp declined to explain the decision, which prevents short-sellers from betting that the company's stock will decline. Its shares fell about 2 percent Friday.