Company chairman, wife sold Hong Kong stock as it plunged 89%

[HONG KONG] The chairman of a Hong Kong-listed property developer and his wife cut their stake just as the stock plunged 89 per cent.

Shum Tin Ching and his wife Wang Xinmei sold 93.6 million shares of Jiayuan International Group Ltd on Jan 17 at an average of HK$2.7611 (S$0.478) apiece -- about a 79 per cent discount from the previous day's close -- according to a Hong Kong exchange filing. That reduced their shareholding to 53.92 per cent from 57.65 per cent. Their trades made up about a quarter of the entire volume in the stock for that day, according to data compiled by Bloomberg.

Traders struggled to pinpoint the reason behind last week's rout, with possible explanations ranging from margins calls to maturing debt. Jiayuan said at that time that it wasn't aware of the reason behind the slump nor of any information requiring disclosure.

"The stake reduction is a very confusing move," said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. "Usually when management reduces their stake, they should have a reason. But when the shares plunged last week, the company said they did not see any reason leading to the plunge."

Jiayuan fell 4.8 per cent by 10.27am in Hong Kong on Tuesday.

A representative for the Securities and Futures Commission declined to comment. Hong Kong Exchanges & Clearing Ltd spokesman Jeffrey Ng declined to comment on specific companies.

The declines were caused by false information disseminated by short-sellers, QQ.com reported Monday, citing Mr Shum at a briefing with investors. Mr Shum won't rule out the possibility of increasing his stake with an asset injection or share buyback in the future, the report cited him as saying.

Filing to the exchange showed Mr Shum and Ms Wang had a short position in the company that was reduced to 24.22 per cent from 25.01 per cent. Short interest in Jiayuan stood at 5.1 per cent of free float on Jan 18, up from 4.7 per cent when the shares were sold, according to data from IHS Markit Ltd.

Jiayuan was among a string of Hong Kong-listed companies that saw a wave of selling last week, resulting in prices plunging more than 75 per cent in a matter of minutes. Sunshine 100 China Holdings Ltd and Rentian Technology Holdings Ltd crashed, and at least 10 companies were 20 per cent lower by the close that day, wiping out HK$37.4 billion (S$6.48 billion) in market value. Jiayuan accounted for most of that loss on record volume.

BLOOMBERG