Index glitch caused by system upgrade, Shanghai bourse

Bloomberg | Updated on April 20, 2020 Published on April 20, 2020

An investor looks at an electronic board showing stock information of Shanghai Stock Exchange Composite Index at a brokerage house in Beijing. (file photo)   -  REUTERS

The Shanghai Stock Exchange said a system upgrade was behind Monday’s rare index malfunction that had earlier showed a record slide in a gauge of health-care shares.

The glitch was due to a change to its index-calculation system completed over the weekend, the exchange operator said in a statement posted on its social media account. It also apologized for the error, which earlier affected levels in the benchmark gauge for Chinese equities. Prices showed the CSI 300 Health Care Index falling as much as 17% at the open on Monday, even as none of the 29 stocks in the industry group lost more than 2%. The metric closed with a 0.7% gain.

The indexes erroneous intraday highs and lows will be corrected after Monday’s close, according to the statement. Normal pricing appeared to resume as soon as trading reopened for the afternoon session at 1 p.m. local time. The CSI 300 Index, which comprises stocks listed in Shanghai and Shenzhen, finished 0.4% higher, after earlier falling as much as 2.8%. Daily stock price moves on the mainland are capped at 10% in either direction.

“I’ve never encountered anything like this in my entire career, said Lu Boliang,” a fund manager at Shenzhen Qianhai Daoyi Investment Holdings Co. It is definitely a bad mistake, especially as it impacts various ETF trades -- what will happen to those trades placed at misleading prices? No one knows as it has never happened before.”

At least 20 exchange-traded funds track the CSI 300 Index, according to data compiled by Bloomberg. They are mostly listed in Hong Kong, mainland China, Taiwan and South Korea. A representative for the Shenzhen Stock Exchange wasn’t immediately available for comment.

The CSI 300 gauge of health care firms is up 10% for the year, the top-performing industry group on the broader measure. The CSI 300 has lost 5.9%.

“Those who do quantitative trades using completely automatic programs based on CSI 300 data are most likely to be hurt,” said Chen Jiahe, chief investment officer at investment firm Novem Arcae Technologies Co.

Published on April 20, 2020
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