Retail investors cry foul over Huayi's film preview

Moviemaker accused of insider dealing after preview by institutions sparks panic sell-off

PUBLISHED : Monday, 23 December, 2013, 4:47am
UPDATED : Monday, 23 December, 2013, 5:49am

Personal Tailor has proved to be a bad fit for Huayi Brothers Media.

The ChiNext-listed movie producer is under fire from public investors after a preview of its big-budget new movie caused shares to plummet last week and triggered allegations of insider dealing.

A panic sell-off started when several disappointed institutional investors who had been invited to the preview began to offload the stock.

On Wednesday, the stock lost the 10 per cent daily limit and fell a further 5.8 per cent on the following day. To add to its woes, disgruntled shareholders accused the firm of insider trading, saying it should not have given institutional investors a preview ahead of retail investors.

"By giving institutional investors a first-hand experience of its prime product, the company skewed the playing field," said Zhang Wei, a retail investor. "Huayi gave funds the chance to take advantage of this inside information."

According to data from the Shenzhen Stock Exchange, the top three investors that largely dumped Huayi shares on Wednesday were institutions, though their names could not be accessed.

The moviemaker denied any wrongdoing. "The arrangement of the preview was in compliance with both common practices in the industry and the relevant laws and regulations," it said.

Investors lay much store by Personal Tailor, which was directed by filmmaker Feng Xiaogang, who has a history of delivering hits.

Huayi shares soared more than 30 per cent between December 6 and 16 as investors bet Personal Tailor would set the tills ringing.

"Investors have reasons to vent their anger at the company," said Dazhong Insurance fund manager Wu Kan. "The whole incident again shows it's increasingly difficult for small investors to make a profit on the mainland stock market."

Mainland media estimate that 80 per cent of retail investors lost money this year.

The mainland's retail investors have a long history of getting ripped off by the big boys with greater access to sensitive information.

In the 1990s, powerful institutions would collude with listed firms to spread rumours about the so-called asset restructurings and drive up share prices. They would ride the rally and then cash out, leaving small investors high and dry.

In the past decade, the securities regulator has stepped up policing and encouraged investors to buy shares based on valuation rather than rumours. But most retail investors still get burnt in the roller-coaster market where the big players call the shots.

Wu Jinglian, a renowned economist from a government think tank, likens the A-share market to casinos. Between 2010 and 2012, the Shanghai Composite Index was among the world's worst-performing indices, leaving only a handful of winners.