Two
State-owned
railway
vehicle
manufacturers
denied
insider
trading
allegations
in
an
announcement
on
Tuesday
,
saying
executives
involved
were
unaware
of
the
reorganization
and
based
their
investment
decision
solely
on
the
prospect
of
the
companies
.
Such
claims
have
cast
a
shadow
on
the
deal
,
which
is
expected
to
create
the
world
'
s
largest
train
manufacturer
by
sales
,
as
media
reports
revealed
that
more
than
20
executives
of
CNR
Corp
and
CSR
Corp
and
their
relatives
were
found
to
have
bought
and
sold
stocks
in
each
company
before
the
announcement
of
the
merging
proposal
.
The
CSR
denied
the
allegation
in
a
filing
to
Hong
Kong
Exchange
,
stating
that
the
trading
by
relevant
parties
was
“
merely
individual
investment
and
has
no
connection
with
the
reorganization
.”
The
CNR
released
a
similar
announcement
at
the
same
time
,
saying
management
involved
had
dealt
in
the
CSR
shares
before
they
were
informed
of
the
merger
proposal
and
their
trading
were
based
on
the
public
information
and
their
own
analysis
of
the
investment
value
of
the
shares
.
Insider
trading
allegation
According
to
the
announcement
,
eight
CNR
senior
management
,
including
the
company
'
s
chairman
Cui
Dianguo
,
president
Xi
Guohua
,
vice
president
Gao
Zhi
,
board
secretary
Xie
Jilong
and
their
relatives
,
were
allegedly
involved
.
The
merger
document
showed
that
Cui
Dianguo
bought
15,000
shares
in
CSR
at
an
average
of
price
5.14
yuan
(87
cents
)
per
share
and
sold
50,000
shares
at
the
price
of
5.96
yuan
from
April
to
October
last
year
.
But
the
company
did
not
disclose
how
many
shares
Cui
owned
before
April
.
The
largest
amount
of
stocks
traded
were
by
Gao
Zhi
and
his
relatives
.
They
bought
and
sold
nearly
2
million
shares
in
CSR
with
total
investment
exceeding
10
million
yuan
prior
to
the
trading
suspension
,
according
to
the
information
.
Dong
Dengxin
,
director
of
the
Finance
and
Securities
Institute
at
the
Wuhan
University
of
Science
and
Technology
,
said
the
key
to
determining
whether
the
trades
were
classified
as
insider
trading
depends
on
how
the
regulator
dictates
the
formation
date
of
the
sensitive
information
.
"
The
allegation
has
attracted
public
attention
and
triggered
market
reaction
,
which
could
be
viewed
as
positive
progress
for
China
'
s
stock
market
as
it
is
becoming
much
more
sophisticated
and
sensitive
to
potential
illegal
activities
,"
Dong
said
,
adding
that
the
final
result
depends
on
the
regulators
'
investigation
.
It
remained
unclear
whether
securities
watchdog
had
launched
an
investigation
into
the
share
dealings
.
Mega-size
merger
Rumors
of
the
merger
of
CNR
and
CSR
first
surfaced
in
August
last
year
when
the
two
companies
engaged
in
a
price
war
to
compete
on
overseas
orders
.
The
two
companies
suspended
their
stocks
from
trading
from
October
,
and
announced
their
merging
proposal
by
the
end
of
last
year
after
two
months
of
government
review
and
preparation
.
According
to
the
plan
,
CSR
will
issue
shares
to
CNR
'
s
shareholders
to
complete
the
merger
.
The
two
companies
soared
by
the
daily
limit
of
10
percent
on
Dec
31
once
trading
resumed
.
Wang
Mengshu
,
an
academic
at
the
Chinese
Academy
of
Engineering
and
a
supporter
of
the
move
,
said
the
domestic
market
for
high-speed
trains
is
quite
saturated
,
so
the
merger
will
prevent
unhealthy
price
competition
in
the
world
market
.
"
The
new
group
will
have
a
clear
edge
over
global
rivals
by
being
able
to
optimize
the
two
rail
product
manufacturers
'
technological
edges
,
human
capital
and
production
capacity
,"
said
Wang
.
==========================
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