China company insiders skim the cream off frothy stock market

Sun Jun 14, 2015 5:04pm EDT
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By Samuel Shen and Pete Sweeney

SHANGHAI (Reuters) - Senior executives of listed firms in China have stepped up the pace at which they are selling shares in their own companies, suggesting they may have doubts about whether their stock prices can go much higher.

In May company insiders - senior executives or their relatives - sold a combined 1.68 billion shares, a tripling from April, and much more than in each of the previous months of this year, according to data compiled by Reuters.

Share sales by senior managers are sometimes taken as a worrying sign by investors, as they can indicate people who know a company best think its stock price is too high.

"It's a vote of confidence," said Hong Hao, chief strategist at Bank of Communications International.

"It's evidence that stock prices are high".

However, Hong added he expects these sales will only slow, not stop, stock price rises, in what's become a frenzied market.

China's benchmark stock indexes .SSEC .CSI300 have surged nearly 150 percent over the past year, beating the rest of the world's major indexes, even as the country's economy slows.

Shenzhen's start-up board ChiNext .CHINEXTC has more than tripled in the last 12 months and is now trading at earning multiples of 140, meaning at the current level of profitability, investors need to wait 140 years to recoup their investments.   Continued...

An investor looks at an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, China, June 12, 2015. REUTERS/China Daily