Shenzhen Stock Exchange suspends three companies as loosened trading rules fuel wild gains on ChiNext tech board
- The move comes less than three weeks after the limit on how much a single stock can rise or fall every day was doubled to 20 per cent
- The ChiNext index tumbled 4.8 per cent for its biggest loss since July on concerns about heightened regulatory scrutiny and elevated valuations
The Shenzhen Stock Exchange has moved to stamp out wild trading by ordering the suspension of three small companies less than three weeks after it doubled the daily trading band of its technology board.
Trading of shares in Xinjiang Tianshan Animal Husbandry Bio-engineering, Shenzhen Changfang Group and Zhengzhou Sino-Crystal Diamond was halted from Wednesday on the ChiNext board after the stocks skyrocketed in recent days, according to a statement on the website of the Shenzhen bourse.
It is the second time this month that shares of Xinjiang Tianshan have been suspended after the cow-breeding company surged almost sixfold in the past three weeks. Shares of Shenzhen Changfang, a maker of light-emitting dioxide products, have jumped by the new 20 per cent daily cap every day over the last week, while the stock of Zhengzhou Sino-Crystal has surged by that amount for three consecutive days.
In the case of Xinjiang Tianshan, retail buying accounted for 97 per cent of the stock’s transactions over the last week, and the shares were held for only between one and three days before being sold, according to the Shenzhen exchange.
“The Shenzhen exchange has again reminded investors of [the importance of] risk awareness and adhering to value investing,” the bourse said in a statement on its website. “It is advised not to speculate on small caps and poor-quality companies to avoid unnecessary losses.”
Xinjiang Tianshan, Shenzhen Changfang and Zhengzhou Sino-Crystal all posted first-half losses this year and warned of no immediate improvement in corporate fundamentals.