A growing number of Chinese companies are blaming trading typos for insider stock sales
An investor watches the electronic board at a stock exchange hall on November 26, 2018 in Nanjing, Jiangsu Province of China.
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BEIJING — In a sign of how murky the Chinese stock markets can still be, some publicly listed companies have disclosed odd instances of “accidental” stock sales in the last few weeks.
For example, Shenzhen Changfang, a manufacturer of light-emitting diode (LED) products, said in a filing that on Friday a shareholder named Nie Xianghong accidentally sold 16,000 shares by typing in the wrong stock ticker. She was acting in accordance with Li Dichu, one of the company’s top 10 investors who has a roughly 11% stake and had planned to trim his holdings by about 3% of the company’s shares, the filing said.
In a publicly released response Monday to the Shenzhen Stock Exchange’s letter of concern, the company said there was no insider trading or market manipulation.
The company also disclosed in filings that Li and a few other major investors have yet to complete their share reduction plans. The stock price has more than doubled from Sept. 2 to Sept. 7 despite disclosure of sharp revenue losses from the shock of the coronavirus in Changfang’s export markets such as India.
This and other trading “errors” by major shareholders come after mainland Chinese stocks have recorded significant gains this year. The CSI 300 is up more than 12% and the Shanghai composite has risen 7% for the year so far.
Regulators have also moved ahead with efforts this year to open up domestic financial markets further to foreign institutions, and remove some restrictions on stock listings and trading.
However, analysts generally emphasize that stricter punishment for securities fraud is needed for China’s stock markets to mature.
Other filings this month reveal the accidental stock sales can occur at both smaller and very well-known companies.
Sany Heavy Industry, a giant in the manufacturing of construction machines, disclosed Friday that due to “misoperation” in the transaction process, Mao Zhongwu sold 96,700 more shares than he had said he would reduce his holdings by. Mao is one of Sany’s top 10 shareholders and will be fined 300,000 yuan ($43,852) for his illegal sales, according to company filings.
Jiangsu Lettall Electronic, a supplier for LCD TV companies, said in a filing on Sept. 3 that Zhang Defeng, the former chairman of the company’s board of supervisors, mistakenly sold 42,000 shares before the expiration of the six-month lockup period following the expiration of his term in May.
On Sept. 1, TCL Technology said in a filing that shareholder Li Dongsheng also typed in the wrong ticker and sold 5 million shares, by mistake.