Tue. May 11th, 2021

Regulation HK

Financial Regulator

Shenzhen’s ChiNext Board Under Scanner for Corruption Risk

2 min read

China’s anti-graft watchdog is said to be looking into whether wild swings may have been caused by insider trading or manipulation involving exchange officials.

China’s CCDI (Central Commission for Discipline Inspection) has reportedly sent an on-site supervision team to the SZSE (Shenzhen Stock Exchange) to look for potential insider trading or market manipulation on the ChiNext board.

The anti-graft watchdog is looking for discrepancies that may impede reforms that led to the registration-based IPO system on the ChiNext board. The new system debuted with its first 18 listings last month.

The ChiNext fell by more than 7 percent last week, with many individual stocks seeing wide fluctuations due to the board’s wider daily trading cap of 20 percent.

The CCDI is said to be looking into whether wild swings in ChiNext stocks may have been caused by insider trading or market manipulation involving officials in charge of listing and market participants.

The watchdog has held one-on-one talks with over 20 officials and staff members from the SZSE management, the ChiNext Board Listing Committee and the review center.

Last Tuesday (9 September), as part of it sown efforts to curb abnormal volatility, the SZSE ordered the suspension of three ChiNext companies: Xinjiang Tianshan had increased sixfold over three weeks; Shenzhen Changfang had risen 20 percent daily for a week; and Zhengzhou Sino-Crystal had risen 20 percent daily for three consecutive days.

In a notice, the SZSE reminded investors of the importance of risk awareness and of adhering to value investing. “It is advised not to speculate on small caps and poor-quality companies to avoid unnecessary losses,” it said.

Additional reporting from SCMP.

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