The Shenzhen Stock Exchange introduced new rules yesterday aimed at restraining fluctuations in first-day trading of small and medium-sized companies, in an attempt to stamp out alleged price rigging.
From now on, the exchange can suspend trading in a newly listed company's shares for 15 minutes if its stock rises or falls more than 50 per cent from its opening price, and a further 15 minutes if the price moves a total of 90 per cent.
'This initiative is designed to avoid a similar situation to the [China CAMC Engineering] case, in which possible price manipulation was involved,' a regulatory official said.
CAMC was the first company to sell shares in a mainland initial public offering following the lifting of a one-year ban. Its shares jumped to nearly 50 yuan on its June 19 debut before closing at 31.97 yuan, up more than four times from the IPO price of 7.40 yuan. The stock then proceeded to drop the 10 per cent daily limit for the next five sessions. It closed yesterday at 14.32 yuan.
Under existing rules, after the first day of trading, a stock can move a maximum of 10 per cent before trading in it is suspended for the day.
The new rules apply only to the Small and Medium Enterprise (SME) board and forbid the exchange from suspending trading after 2.50pm. Any trading suspension must be lifted at 2.57pm to allow investors to trade for the last three minutes of the trading day.