Everbright 'fat finger' error sparks mad rally in Shanghai
Trading in mainland brokerage suspended after input blunder places order for 3 billion shares and sends stocks soaring amid copycat spree
Millions of mainland equity investors took a roller-coaster ride yesterday after an apparent "fat finger" trading error by China Everbright Securities which may have caused multibillion-yuan losses.
As a result of the trade, the Shanghai Composite Index surged about 6 per cent in two minutes before the end of the morning session. Sixteen major stocks rose by the 10 per cent daily limit, leaving investors and traders to guess at what was behind the strong rally.
Sources said a trader with Everbright was supposed to buy 30 million shares for the brokerage's exchange-traded fund. Instead, he mistakenly placed an order to buy 30 million lots, or three billion shares.
The "fat finger" trade - so named when someone presses the wrong key when inputting data - cost Everbright an extra 3 billion yuan. The trade attracted more than 3 billion yuan of copycat buying from other institutions on speculation that some major announcement was forthcoming.
"The incident could be written into the annals of China's stock market," said Dong Jun, a hedge fund manager. "Those who followed Everbright's irrational buying have paid a big price."
A trader with a Shanghai-based brokerage said his company, hoping to chase a short-term gain, increased its purchases of shares. The market was rife with speculation that the sudden surge was in response to incentives to be rolled out soon by the market regulator.