Aug 20, 2019 07:53 PM

News Editor Fined for Rumors That Rattled Stock Markets

The China Securities Regulatory Commission in Beijing, on April 25, 2018. Photo: VCG
The China Securities Regulatory Commission in Beijing, on April 25, 2018. Photo: VCG

China’s securities regulator fined four people including an online news editor last week, after it ruled they had started and spread an online rumor in January that the financial watchdog would promote short selling on the country’s stock markets, according to official statements made public on Monday.

On Jan. 28, the first trading day of the new China Securities Regulatory Commission (CSRC) Chairman Yi Huiman’s tenure, Chen Yiheng allegedly (link in Chinese) published a post claiming Yi had said at a press briefing that the commission would promote short-selling and delisting mechanisms in China’s stock markets in 2019. Chen falsely attributed the information to Bloomberg, the regulator said.

Chen is a 32-year-old resident of Central China’s Hunan province, the CSRC said.

The other three people fined by the CSRC — two Sina Weibo users who had more than 2 million followers combined, as well as an editor at Sina’s financial news portal — reposted the news on the morning of Jan. 29 without fact-checking, the CSRC said. The reposting caused the rumor to spread to multiple major news websites.

Bloomberg denied that it had released the news mentioned in Chen’s post, according to a Sina report (link in Chinese) published on the morning of Jan. 29. The CSRC said (link in Chinese) after the morning trading session that day that Yi hadn’t yet given any press briefings since taking office on Jan. 26.

On the day that the rumor emerged, stock markets were still suffering amid China-U.S. trade tensions and gloomy earnings reports. The benchmark Shanghai Composite Index fell 1.3%, and the Shenzhen Component Index fell 1.83% from 9:56 a.m. to 10:25 a.m. on Jan. 29.

The CSRC fined Chen 200,000 yuan ($28,315) while the other three individuals were fined 120,000 yuan each, citing the section of China’s Securities Law which forbids fabricating information or spreading fake information that can disrupt securities markets.

China officially began to allow securities lending and margin financing in early 2010, but the country’s stock markets have long seen much less securities lending, a key part of short selling, than margin financing. As of Monday, the outstanding balance of securities lending in the Shanghai and Shenzhen stock markets was 12.4 billion yuan, well below the outstanding balance of margin financing, which stood at 893 billion yuan, according to data from China Securities Finance Corp. Ltd. (link in Chinese). The new high-tech board — the STAR Market under the Shanghai Stock Exchange — is intended to push forward a number of reforms, including the broader use of securities lending and margin financing.

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