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A rising variety of Chinese language firms blame typing errors for promoting insider shares

An investor observes the electronic board in a stock exchange hall in Nanjing, Jiangsu Province, China on November 26, 2018.

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BEIJING – As a sign of how murky China's stock markets can still be, several public companies have reported strange cases of "accidental" stock sales over the past few weeks.

For example, Shenzhen Changfang, a manufacturer of light emitting diode (LED) products, said in a press release that a shareholder named Nie Xianghong accidentally sold 16,000 shares on Friday by typing in the wrong stock ticker. It acted in concert with Li Dichu, one of the company's top 10 investors, who has around 11% stake and had planned to reduce his stake by around 3% of the company's shares.

In a response to concerns from the Shenzhen Stock Exchange released on Monday, the company said there was no insider trading or market manipulation.

The company also announced in its filing that Li and several other major investors have not yet finalized their share reduction plans. The share price more than doubled from September 2-7, despite the fact that Changfang's export markets such as India saw severe revenue losses from the coronavirus shock.

This and other major shareholders' trading errors occur after mainland Chinese stocks have seen significant gains this year. The CSI 300 is up more than 12% and the Shanghai Composite is up 7% year to date.

Regulators also pushed ahead this year in efforts to further open domestic financial markets to foreign institutions and to lift some restrictions on the listing and trading of stocks.

However, analysts generally stress that more severe punishment for securities fraud is needed in order for China's stock markets to mature.

Other filings earlier this month show that accidental stock sales can occur in both smaller and well-known companies.

Sany Heavy Industry, a giant in construction equipment manufacturing, announced Friday that due to "misoperation" in the transaction process, Mao Zhongwu sold 96,700 more shares than he announced he was reducing his holdings by. Mao is one of Sany's 10 largest shareholders and has been fined 300,000 yuan ($ 43,852) for illegal sales, the company said.

Jiangsu Lettall Electronic, a supplier to LCD TV companies, said in a September 3 announcement that Zhang Defeng, the company's former chairman of the company's board of directors, had mistakenly sold 42,000 shares before the six-month lock-up period after his May tenure expired.

On September 1, TCL Technology announced in a report that shareholder Li Dongsheng had also entered the wrong ticker and inadvertently sold 5 million shares.

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