China’s fat cats turning to divorce for quick stock sales

<p>In China, when it comes to stocks, it turns out that love isn't blind. China's wealthiest are
finding themselves in the spotlight as divorce rates are on the up, prompting
the country’s securities regulator to step in and put the brakes on swift post-breakup
stock selloffs. The cynics at the regulator’s office smell something a little
fishy.</p><p>At the heart of this crackdown is a rule that limits bigwigs who hold a
chunky 5% or higher stake in a company from offloading more than 2% of their
precious shares into the market within 90 days. Moderation in all things, I
guess. </p><p>Something in the air?</p><p>Why the fuss? Well, it turns out that the heads of some of China's biggest
listed companies decided to cash in and feign (or acknowledge) marital woes by
unloading substantial chunks of shares right after ditching their spouses. It
sounds like a real-life episode of Real Housewives of Beijing – and if that isn’t
a thing, it should be – with couples calling time on their marriages and
reaping the financial rewards.</p><p>According to <a href="https://www.bloomberg.com/" target="_blank" rel="nofollow">Bloomberg</a>'s sleuthing, at least eight heavyweight
shareholders in China's listed firms did this share-shifting dance, to the tune
of a jaw-dropping $3.9 billion, no less.</p><p>After their split, half of these freshly uncoupled duos then announced
plans to throw their shares onto the <a href="https://www.financemagnates.com/tag/china/" target="_blank" rel="follow">market</a>, just weeks or months after the ink
dried on their divorce papers. Talk about swift emotional healing, or should we
say, swift emotional stock dumping?</p><p>The star of this stock divorce show was electronics firm Suzhou Secote
Precision Electronic, where the company's chairman, Sun Feng, handed over a
whopping $192 million worth of shares to his ex back in January. Now, that's
what we call an expensive goodbye gift.</p><p>As for why these tycoons and tycoonettes decided to part ways, well,
that remains a mystery. Maybe they just figured that it's cheaper to pay
alimony in stocks than in cold, hard cash, or maybe it was all about <a href="https://finance.yahoo.com/news/divorce-filings-china-surged-crazy-151824124.html" target="_blank" rel="nofollow">property taxes</a>.</p><p>But the China Securities Regulatory Commission (CSRC) wasn't having any
of it and decided to address the market’s concerns. Before the crackdown, even
with the 2% share sale limit, bigwigs could still sell up to 4% of their
cherished stock post-divorce. But the CSRC has pledged to close this seemingly
convenient loophole.</p><p>Not to be outdone, the Shanghai <a href="https://www.financemagnates.com/terms/s/stock-exchange/">Stock Exchange</a> and Shenzhen Stock
Exchange chimed in, declaring that they would stick to the same 2% share sale
limit for major shareholders, even after their marriages went kaput, you can
apparently break hearts, but the rules don’t change.</p><p>Tough times for Chinese markets</p><p>All this stock market drama unfolds against the backdrop of Beijing's
desperate attempts to revive its sluggish economy and shaky markets, still
nursing their wounds from the COVID-19 pandemic. If we’re still talking in
terms of divorce, investors decided to break up with Chinese stocks in style,
dumping a record-breaking $12 billion worth just last month. Relationship over,
time to get out. Funnily enough, real-life divorces also spiked at the end of the COVID lockdowns.</p><blockquote><p lang="en" dir="ltr">Divorces are spiking in China as couples emerge from their coronavirus quarantines <a href="https://t.co/zhBKPtYsfu">https://t.co/zhBKPtYsfu</a></p>— Businessweek (@BW) <a href="https://twitter.com/BW/status/1244962979818463233?ref_src=twsrc%5Etfw">March 31, 2020</a></blockquote><p>In response to the market's heartbreak, the Chinese government has
pulled out all the stops, akin to buying some gas station flowers, it unveiled
new initiatives like reducing required collateral and imposing a tax on stock
transactions. Time will tell.</p><p>So, what's the verdict? Well, the Shanghai Composite is having a lukewarm
year, up by 1%. Meanwhile, the CSI 300 Index, which tracks mainland stocks, is
having a bit of a wobble and is down by about 3.5%. Let's hope they can work
things out.</p><p>As for the CSRC and Suzhou Secote Precision Electronic, they've kept
their lips sealed, probably busy attending stock market therapy sessions or
swiping right on some new investment opportunities. Love and stocks, after all,
can be quite the rollercoaster ride.</p>

This article was written by Louis Parks at www.financemagnates.com.