"Neway Valve (Suzhou) Co., Ltd." will be listed at the Shanghai Stock Exchange (SSE) for trading on January 17. As the first share listed on the market after suspension of new share issuance for one and a half years, share issuance of Neway Valve has attracted wide attention from the market. Market insiders point out that, presently, as China’s securities market is still at the stage of “Emerging and Transformation”, the problem of new shares speculation remains salient. Small and medium investors, lacking knowledge and experience for investment, often fall victim to new shares speculation.
Between listing of “Sichuan Expressway Company Limited” in July 2009 and listing of “China Molybdenum Co., Ltd.” in October 2012, a total of 98 new shares have been listed for trading on the Shanghai market in nearly three and a half years. According to the trading statistics of the first listing day and the later 5 trading days of new shares, taking an example of accounts with buy-in amount under RMB100,000 on the first day of new shares listing, 54.4% of these accounts on average suffer losses 6 days later. Moreover, over 80% of accounts of 33 new shares (33.7% of all new shares listed during this period) suffer losses, while over 98% of accounts of 8 new shares (8.2% of all new shares listed during this period) suffer losses. It shows that, many small and medium investors following suit to purchase new shares on the first day of their listing or several days later have lost out.
In order to curb new shares speculation after restart of new shares issuance, maintain normal trading order on the market, and protect legal rights and interests of investors, the SSE issued the “Notice of Toughening Regulation on Trading at Preliminary Stage of New Shares Listing” (the “Notice” for short) to the market on December 13, 2013. The “Notice” established a trading suspension mechanism on the first day of listing based on issuance prices of new shares, specified the “abnormal trading behaviors” under special regulation, and the “abnormal fluctuation in trading” during the early stage of new shares listing, as well as strengthened restrictions on trading behaviors of investors on new shares.
According to market insiders, compared with the relevant notice issued by the SSE in 2012, the “Notice” released in 2013 further highlighted control over speculative behaviors on the market and protection for investors. For example, the “Notice” added the measure on order price restriction on the first day of new shares listing, namely, investors’ valid order prices on the first day of new shares listing should meet Article I of the “Notice”, while any orders exceeding the valid order price range should be deemed as invalid. In addition, after market closing on the first day of new shares listing, investors may search relevant information about buying or selling of certain new shares by investors of all categories on the very day on the item of “Trading information on the first day of new shares listing” under the column of “Disclosure of trading information” on the SSE’s official website, which will facilitate investors to learn about trading details on the first day of new shares listing, and trade new shares rationally.
As for newly listed shares such as shares in Neway Valve, an official of the SSE says that, the SSE will regulate the whole process of pre-market-opening, market trading, and post-market-closing during the early stage of new shares listing.
According to trading of new shares on the market over recent years, the SSE has sorted out over 200 major accounts dealing in new shares speculation and reported them to relevant securities companies, and required them to pay high attention to the trading of new shares by these accounts. Recently, the SSE has visited some securities companies and offered on-site supervision and guidance for their administration on trading behaviors of clients during the early stage of new shares listing. Further, the SSE sends information about trading regulation during the early stage of new shares listing to all securities companies on the trading day before new shares listing, and requires the securities companies to send relevant information to their clients on time. The SSE will also release information about trading regulation during the early stage of new shares listing to the market on its official micro-blog, so as to remind investors of risks in new shares trading. Besides, during the early stage of new shares listing, the SSE will, depending on fluctuations of trading prices, issue risk alerts to investors in proper occasions through its official micro-blog and other ways.
The official of the SSE reiterates the SSE’s attitude on strict regulation on some accounts speculating on new shares. During the early stage (the first 10 trading days) of new shares listing, if an account has any abnormal trading behaviors of new shares as mentioned in the “Notice”, such as the in-session buy-in amount on a single day exceeding 0.1% of the number of relevant floating shares, the SSE will adopt regulatory measure on in-session trading suspension for the account on the very day. If an account’s in-session trading has been suspended for several times, the SSE will impose disciplinary punishment on limiting the account’s purchase of all kinds of A shares in the Shanghai market on several trading days. If an account’s trading has been limited twice or above, the SSE will, in light of the market situation, regard the account’s owner as an ineligible investor, and limit its trading during the early stage of new shares listing within a certain period. For the accounts badly speculating on new shares, the SSE will further analyze circumstances and report the accounts suspected of committing violations to the China Securities Regulatory Commission for sanctions.
The SSE stresses again that individual investors, and professional institutional investors including fund companies, insurance companies, and trust companies should strictly abide by the “Notice” in their trading during the early stage of new shares listing. All investors, especially small and medium-sized investors, should fully understand risks in speculation on new shares, rationally trade new shares, and maintain a steady market.