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August 11, 2009

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Shenzhen bourse tells CSRC of suspect accounts

THE Shenzhen Stock Exchange has reported to the securities regulator more than 40 stock accounts that were allegedly involved in manipulating prices of new shares at their trading debut since July.

China resumed initial public offerings in late June after a 10-month hiatus, and shares of the first five companies, three of which were listed in Shenzhen, jumped an average 112 percent on their first trading day.

Some companies surged much higher than market expectations at their trading debut and fluctuated sharply, which tied in with the intention of some investors to seek an unfair advantage by quoting unreasonable prices, an official of the Shenzhen bourse said on its Website yesterday.

The illegal moves include trading shares with relatives or friends to push up stock prices and sell the shares to smaller investors at a high price, and investors quoting a unreasonably high price to lure smaller punters but when the stock reaches that price, they decide not to buy them.

The China Securities Regulatory Commission, which set up a system to pursue and punish illegal activities by coordinating with the Shanghai and Shenzhen stock exchanges, has launched a probe into these accounts, according to the Shenzhen bourse.

The soaring price rise by the IPOs on their trading debut has attracted the attention of the regulator, and sources said the CSRC is studying whether it should implement additional measures to curb speculative trading. It has already introduced measures to reduce market volatility and to protect the interests of minority investors.

Among the new rules, a company's shares must be halted for 30 minutes on their first day of trading if the price rises or falls more than 20 percent from the opening level. Another 30-minute suspension is enforced when the price fluctuates more than 50 percent in either direction.

Some investors have called for curbs on first-day gains to discourage speculation. In the mainland stock market, there are no limits on price fluctuations on trading debut, but existing shares are allowed to rise or fall by the maximum 10 percent.


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