Insider bears emerge ahead of Lunar New Year holiday
Directors sell surprising amount of shares in their companies. A sign of things to come?
Directors were bearish in the run-up to the Lunar New Year, with 86 companies reporting disposals of their shares by directors worth a HK$998.6 million from January 21 to February 8.
In value terms, selling of shares by directors in the past three weeks accounted for nearly 93 per cent of total insider turnover, compared with 35 per cent for the same three-week period last year.
The heavy selling by directors in the run-up to the break is even more surprising given that the market is expected to rally after the holiday. Likely contributing to the sales was the strong run by the market since June last year from 18,185 points to over 23,800 points in the last week of last month.
Aside from signs that stocks have perhaps reached their fair value, the heavy selling might also be an early sign of what to expect in the reporting period from March to April.
Buy-backs of their own shares by companies were also low in the run-up to the holiday, with just 14 companies reporting 173 transactions worth HK$294 million from January 21 to February 8. The figures were far below the 43 companies that posted 516 trades worth HK$520 million in the three weeks before the Lunar New Year in 2012.
Aside from directors, several funds sharply reduced their positions on the back of price gains. Three stocks that recorded heavy substantial shareholder sales last week were Sinopec Shanghai Petrochemical, CST Mining, and Semiconductor Manufacturing. Ospraie Advisors ceased to be a substantial shareholder of Up Energy Development after the stock fell 28 per cent.
The Government of Singapore Investment Corp lowered its stake in crude oil processor Sinopec Shanghai Petrochemical to below 5 per cent of the issued capital after the stock rose 19 per cent from HK$2.56 on January 25. The fund manager ceased to be a substantial shareholder on February 7 following the sale of 9 million shares at HK$3.05 each, which reduced its holdings by 8 per cent to 111.001 million shares, or 4.76 per cent of the issued capital. The stock closed at HK$3.04 on Friday.
Elliott Capital Advisors recorded its first sale in mineral resources explorer and developer CST Mining since it became a substantial shareholder in May last year with a disposal-related filing on February 5 of 8.5 million shares at 12 HK cents each. The trade cut its holdings to 2.163 billion shares, or 7.99 per cent of the issued capital.
Taiwan Semiconductor Manufacturing unloaded more shares of integrated circuits' manufacturer Semiconductor Manufacturing at higher than its previous sale prices, with 270.3 million shares sold on February 7 at 48 HK cents each. The trade reduced its holdings by 13 per cent to 1.872 billion shares, or 5.85 per cent.
Robert Halili is managing director of Asia Insider.