Half of Listed Chinese Companies Might Manipulate Their Stock Prices: Fund Manager

Investors look at stock price movements on a screen showing stock prices at a securities company in Beijing on Oct. 11, 2018. Nicolas Asfouri/AFP via Getty Images

A renowned Chinese equity fund manager revealed details of a listed company manipulating its stock price, and said half of the Chinese listed companies are involved in similar violations. On May 16, the Chinese regime announced it was investigating the issue.

“In recent years, lawbreakers have used shareholding, capital, information, and technological advantages to conspire and manipulate the stock market,” the China Securities Regulatory Commission (CSRC) stated in its May 16 announcement and pledge to maintain the capital market’s order.

China has more than 4,000 companies listed in the Shenzhen Stock Exchange and Shanghai Stock Exchange—the only two exchanges in mainland China—according to CSRC, Chinese regulator of the securities industry.

ZOY Stock Investigation

ZOY Home Furnishing, a Zhejiang-based listed company, is being investigated by CSRC. The economic disputes between ZOY and Ye Fei, China’s famous equity fund manager, revealed the covert manipulation of stock prices.

Ye entered the securities business in 1994, won the state-run CCTV organized China Stock Market Civil Master Competition in 2007, and was managing more than 50 private equity funds in 2016, state-run media China Economy reported.

A secret deal between ZOY and Ye, set up in March, was revealed through audio recordings, documents, and text conversation records that Ye revealed to state-run media Hongxing Capital News and Securities Daily, as well as the investigation these media conducted in China and the public record of ZOY’s stakeholders’ list.

ZOY wanted public equity funds to buy its stocks (valued at $4.67 million) in the Shanghai Stock Exchange, which would increase its stock price, and it hired brokers to make it happen.

Pu Feidi, a broker from Beijing, hired Liu Peng from Qingdao to make the deal with Ye by paying him 6.5 percent of the stock value as remuneration. Six percent of the stock value was to be paid to the personal accounts of public equity fund managers who arranged the purchase, and Ye would receive the remaining 0.5 percent.

Ye then subcontracted the deal to Guan Xuan, a manager at Hengtai Securities. Guan didn’t arrange for the company to buy the stocks, but subcontracted the deal to managers from public equity funds Minsheng Securities and Tianfeng Securities.

On March 31, Minsheng Securities bought $2.33 million in ZOY stock. Tianfeng Securities, however, didn’t buy any of the stock because the price decreased to 10 percent, and the exchange stopped all trade in ZOY stock that day.

Thus, when Pu and Ye met in Shenzhen city on April 1, Pu refused to pay Ye, who, in turn, grabbed Pu’s ID and bank cards. The two then went to a police station, where Ye returned the stolen cards and Pu signed a paper promising to pay Ye.