Third Chinese company has ‘fat finger’ issue, but analyst cries wolf

A third Chinese company in less than a week said a major holder accidentally sold its shares, increasing speculation that insiders may be testing the market before they offload stakes.

Shenzhen Changfang Group said Nie Xianghong, a shareholder acting in accord with top investor Li Dichu, accidentally sold 16,000 shares on Friday by imputing the wrong ticker.

The stock, which rose by the 20% limit for a fourth day on Monday, has more than doubled in price this month. Li owned more than 11% of the company before the sale.

On Thursday, Sany Heavy Industry said its board would fine stakeholder Mao Zhongwu after an unspecified “trading error” led to him offloading 96,700 more shares than he had intended to. Days earlier, the chair of display maker TCL Technology Group said a trader accidentally sold 5-million company shares using his account.

The sudden wave of erroneous trades is putting the spotlight on insider dealings at China’s listed companies. Selling by major shareholders is often taken as a negative signal in China — suggesting executives are losing confidence in a company’s prospects — and can lead to stock declines once they are disclosed.

“The way I picture this happened was that these executives wanted to test whether it was possible to sell their shares in the open market,” said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Management Consultant. “Call them mistakes, but they were done on purpose. The executives naturally have an urge to take profit.”

Changfang has publicly warned investors of abnormal fluctuations in its shares. The firm, which makes LED lighting products, is among Shenzhen’s best stocks for September despite saying it suffered a net loss of ¥33.8m in the first half of 2020.

The Shenzhen Stock Exchange said on Friday it is monitoring the shares due to the significant gains.

Bloomberg