China stock market

Chinese talk show host fined US$13.5 million for misleading small equity investors

China Securities Regulatory Commission penalises well-known TV host Liao Yingqiang for manipulating the market and pocketing ill-gotten gains 

PUBLISHED : Wednesday, 09 May, 2018, 10:58am
UPDATED : Wednesday, 09 May, 2018, 12:33pm

Authorities on the mainland are targeting unscrupulous celebrities who profit from stock tips offered to small investors.  

On Monday, Liao Yingqiang, 48, a stock market television talk show host, was fined 86.2 million yuan (US$13.5 million) – double his ill-gotten profits – by the China Securities Regulatory Commission after he was found to have unduly influenced the share prices of 39 listed companies.

The penalty provides yet another snapshot of the country’s arcane stock market where millions of retail investors habitually chase rumours and stock tips to make their investment decisions, only to find that they have incurred heavy losses.

The securities regulator said in a statement that Liao used TV shows and social media to promote shares of certain companies before taking profits as he sold shares in these firms.

A buying spree surrounding a stock normally drives up share prices, creating an easy exit for existing shareholders to lock up gains.

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The CSRC said it would also confiscate Liao’s illicit gains, amounting to 43.1 million yuan, from 13 affiliated accounts between March and November 2015. It did not say whether Liao would be transferred to law-enforcement authorities for further investigations.

In an apology carried on his online consultancy website, Liao said that he “had misled retail investors,” and pledged to “avoid sensitive issues” when commenting on stock market in the future.

Liao became famous as the host of the Shanghai-based China Business News TV channel between 2012 and 2016, which he quit to set up his own stock market consultancy.

Stronger efforts called for at educating China’s 100 million retail investors

Li Shitong, an analyst at China Development Bank Securities, said well-known market commentators and analysts should learn a lesson from the scandal because taking advantage of their misleading information to make money is being targeted by the regulator.

The CSRC has been coming down heavily on market irregularities to protect small investors over the past decade.

Liao’s case may not be enough to educate the retail investors. They still view the stock market as a casino
He Yan, Shanghai Shiva Investment

But the efforts to educate the country’s more than 100 million individual stock investors to buy shares on valuation rather than on rumours has not yielded the desired results.

According to a senior official with the Shanghai Stock Exchange, China’s small investors still favour underperforming and unprofitable stocks as they believe they can get rich quickly amid market volatility.

The official, who did not want to be identified, said the trading data showed that small investors remain keenly interested in “junk stocks”, a scenario unchanged from a decade ago.

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On the mainland, investors are considered an individual stock player if their total equity investment on A shares is less than 500,000 yuan.

Millions of mainland investors suffered heavy losses in mid-2015 when US$5 trillion of market value evaporated in a stock market rout, prompting Beijing to pump about 1.5 trillion yuan of rescue funds into the system to underpin the falling stocks, and avoid social unrest.

“Liao’s case may not be enough to educate the retail investors,” said He Yan, a fund manager with Shanghai Shiva Investment. “They still view the stock market as a casino.”