Online Forums Give China's Investors Market-Moving Intel

(Bloomberg) -- China’s investors have a unique channel to get market-moving intel.

The exchanges in Shanghai and Shenzhen have online Q&A platforms where anyone with a mainland cell number can sign up and grill listed companies. Comments on the sites, little known among foreign investors, often resemble the moans seen on a corporate Twitter feed: "What’s wrong with Hangzhou Jiebai? Why are your shares falling every day?" a user wrote on Dec. 19.

The response from the company wasn’t much of a tip: "Spring isn’t far away!"

But other replies can spark an immediate share price reaction.

Guizhou Taiyong-Changzheng Technology Co., which makes circuit breakers, surged by the 10 percent daily limit for six days after the company said in response to a question that its products were being sold in the President Xi Jinping-backed Xiongan economic zone. The company later disclosed the size of its Xiongan orders in an inquiry by the Shenzhen exchange.

As a result of such information affecting stocks, the platforms, which were set up in 2011 and 2013, have become potential goldmines for investors seeking an edge in a market that is persistently among the world’s worst performing. The ease with which an answer could move a stock can lead to abuses too.

Be Wary

Inly Media Co. was censured by the Shanghai exchange in November after comments that it had reached a partnership with popular short-video platform Douyin sent the stock surging 41 percent over four trading sessions. Douyin -- owned by Bytedance, the world’s most valuable startup -- refuted the claims, while the Shanghai bourse criticized Inly for "severely misleading" investors and disclosing "significant, sensitive information" on non-designated channels.

Details that could affect share prices should be disclosed only in corporate filings, said Rong Yihao, a partner at Infaith Consulting, whose company advises about 300 listed firms on disclosure matters. Investors need to be wary, he said.

"In some cases, firms may even pose as an investor to ask a question and then answer it in a way that could help push up their share prices," Rong said.

Instances like this remain uncommon: the platforms were set up to encourage the nation’s retail investors to trade based on business fundamentals rather than speculation, as well as to nudge firms toward greater transparency. Most company replies simply direct investors to published statements, and serve to promote corporate interests.

Useful Information

"The platform is a channel for communication to help investors learn more about our company," said Li Bei, corporate secretary at Beiqi Foton Motor Co., the most responsive firm on the Shanghai forum in the past 90 days. "The more precise their question is, the easier for us to provide useful information."

The Shanghai and Shenzhen stock exchanges declined to comment about the forums.

The sheer amount of questions asked can overwhelm, with investors able to use anonymous handles. The Shanghai forum’s most active user, "Showa Romance", posts dozens of questions a day and has asked some 7,500 to date. Yet the forums also serve as a useful outlet for China’s 147 million day traders to let off steam, says Lv Changshun, fund manager at Beijing Dajun Zhimeng Investment Management Co.

Lv checks the boards for responses from the firms whose shares he holds. Like Rong, he advises investors to carefully assess any previously undisclosed details found on the forums to avoid getting duped.

"Trading in China is dominated by retail investors whose decisions are often led by their emotions," Lv said. "These forums allow them to share their fears and vent their frustrations. They’re also a platform for firms to dispel investor concerns and learn what holds their interests."

©2019 Bloomberg L.P.