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https://scmp.com/business/companies/article/1844736/avic-unit-china-probed-selling-shares-despite-chairmans-vow
Business/ Companies

Avic boss punished for selling shares of subsidiary despite chairman’s vow

Stock disposal embarrasses group chairman, who blames foreign short-sellers for market rout

Sijia Jiang
Sijia Jiang

Updated: 10:37pm, 30 Jul, 2015

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Avic Capital said in an announcement to the stock exchange yesterday that its board had decided to remove managing director Yang Shengjun (above). Photo: SCMP Pictures
Avic Capital said in an announcement to the stock exchange yesterday that its board had decided to remove managing director Yang Shengjun (above). Photo: SCMP Pictures
Avic Capital said in an announcement to the stock exchange yesterday that its board had decided to remove managing director Yang Shengjun (above). Photo: SCMP Pictures
The head of a subsidiary at Aviation Industry Corp of China has lost his job for illicitly selling stocks of another subsidiary, in a major embarrassment to the state-owned juggernaut's chairman, who has vowed to defend the country's stock market from "malicious foreign short-sellers".

Shanghai-listed Avic Capital said in an announcement to the stock exchange yesterday that its board had decided to remove managing director Yang Shengjun after it came to light that wholly owned Avic Investment Holdings illicitly sold shares in Avic Heibao, triggering an investigation by the securities regulator.

Avic Heibao said its controlling shareholder and connected parties, Avic Jincheng Group and Avic Investment Holdings, were being investigated by the China Securities Regulatory Commission for reducing stakes in breach of rules, but did not elaborate on the transactions.

An exchange filing by Avic Heibao on June 30 showed Avic Investment, then its second-largest shareholder, dumped all of its 16.8 million shares, or 4.88 per cent of Heibao's issued shares, for 431.4 million yuan (HK$545.9 million) between June 16 and 29, while the largest shareholder, Jincheng, sold 3.4 million shares for 78.8 million yuan between June 5 and 24.

Avic chairman Lin Zuoming was the first senior executive of a state-owned enterprise to blame "malicious" foreign investors for the market rout last month.

In a strongly worded commentary published in state-run Global Times last week, Lin swore to help the market get back on its feet by beefing up share purchases in what he called a stock market war "targeted at the Chinese flag".

"Need I say who the enemy is?" he wrote rhetorically. "Our commitment to prop up the market is ironclad. We want to show small investors we are their diehard ally."

Lin also said Avic spent 338 million yuan in the three days from July 8 to buy stocks of 20 subsidiaries listed on the mainland and in Hong Kong, putting a floor under the plummeting shares.

Lin himself bought 2,000 shares in a helicopter-making unit, Avicopter, on July 17, according to a company announcement.

As part of measures to stop the rout, the CSRC on July 8 forbade major shareholders - those owning more than 5 per cent of a listed company - and senior executives and directors from selling their shares for six months. At least 35 companies violated the rule, according to exchange announcements so far.

Avic Capital said in a separate announcement that two independent directors together bought 76,300 of the company's shares yesterday.