Chinese A-share sell off by major shareholders bodes ill for recovery
Major shareholders in more than 500 A-share companies have sold 37.4 billion yuan of shares since September 1
A quiet selling spree by major shareholders of mainland-listed firms amid the rally before the launch of the through train scheme linking the Hong Kong and Shanghai stock exchanges points to a bearish economic and earnings outlook.
According to Wind Information, a market data provider, major shareholders in 524 A-share companies sold 3.15 billion shares worth 37.4 billion yuan (HK$47.3 billion) between September 1 and October 10.
"As big shareholders rushed to cash out, retail investors better be cautious," said Dong Jun, a Shanghai-based hedge fund manager. "It's a sign that fundamentals remain weak despite a recent rally."
Major shareholders include state-owned parents and founders of listed firms. These entities normally sell their shares on the block trading system at the Shanghai and Shenzhen stock exchanges.
The benchmark Shanghai Composite Index advanced 7.1 per cent between September 1 and October 10, creating a good opportunity for big players to cash out.
A venture capitalist who did not want to be identified said his fund took advantage of the rally to dump shares because he believed a correction was around the corner.
"Fundamentals don't support a rally," said the fund manager. "After all, earnings are likely to be lacklustre."