(Bloomberg) — China’s two essential stock exchanges froze the accounts of a major quantitative hedge fund for 3 days after the money manager dumped 2.57 billion yuan ($360 million) in shares inside a minute Monday.
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Ningbo Lingjun Investment Management Partnership executed the sell orders starting from 9:30 a.m. as shares declined, “disrupting normal trading order,” the Shenzhen exchange said in a press release Tuesday. The Shanghai bourse imposed a similar freeze on Lingjun, which is likely to be barred from trading stocks until Feb. 22.
The trading ban is probably the most recent move by Chinese regulators to reverse a slump in stocks that’s now entering a fourth 12 months. Quant funds are drawing particular scrutiny amid concerns they’ll amplify market volatility and fuel routs. The sector has dismissed these concerns.
Lingjun’s selling orders amounted to “abnormal trading behavior,” and the firm was warned multiple times for an analogous reason this 12 months, in keeping with the Shenzhen statement. The bourse will tighten supervision and maintain “zero tolerance” on any activities that harm investors’ legitimate rights, it said.
The firm will “resolutely comply” with the bourses’ restrictions and learn its lesson, Lingjun said in a press release posted on its Wechat account. The investment accounts under its management bought a net 187 million yuan in shares on Monday, it added.
Lingjun has on a regular basis been “bullish and long on the Chinese equity market, and we’re on a regular basis near full stock positions,” the company said. It also pledged to make certain “smooth and balanced transactions” by improving its trading models and strictly controlling transaction processes. Lingjun is amongst the various four-biggest quant funds in China, with greater than 10 billion yuan under management.
In separate statements from the Shenzhen and Shanghai bourses late Tuesday, the authorities said quant trading made by northbound investors via the mainland to Hong Kong stock connect may even be included inside the reporting scope to the exchanges.
China’s securities regulator made one other move this week that underlines its resolve to shore up the nation’s $8.6 trillion stock market. The China Securities Regulatory Commission, led by latest Chairman Wu Qing, will treat opinions, suggestions and criticism from all parties seriously and implement the “pragmatic and feasible” ones immediately, it said in a press release after holding a series of seminars with investors, listed corporations and foreign institutions over the past two days.
China’s commodities exchanges ended commission rebates on some programmed trades this 12 months, and regulators barred quants from cutting stock positions on certain products earlier this month in a bid to stem the market rout.
Various stimulus measures from Beijing have helped China stocks recover in recent days, though the benchmark CSI 300 Index continues to be down almost 1% for 2024, after dropping for 3 straight years.
–With assistance from Evelyn Yu and Jacob Gu.
(Updates with Ningbo Lingjun statement in fifth and sixth paragraphs)
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