Analysis of the Effectiveness of the A-Share Halt-for-Verification Mechanism After Consecutive Limit-Up Days: A Case Study of Fenglong Co., Ltd.

Based on the latest market data and academic research, I will systematically analyze the effectiveness of the A-Share halt-for-verification mechanism after consecutive limit-up trading days.

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According to public information, the shares of Fenglong Co., Ltd. (002931.SZ) rose by the daily limit for 12 consecutive trading days from December 25, 2025 to January 13, 2026, with a cumulative price increase of 213.97%[1][2]. During this period, the company issued multiple announcements on abnormal stock price fluctuations, clearly stating that:

• The stock price has seriously deviated from the company’s fundamentals[1]
• It has clearly deviated from market trends, with high speculation risks[2]
• There is a risk of a sharp decline in the future[1]

The company voluntarily applied for a trading halt for verification on January 13, 2026, with an expected halt period of no more than 3 trading days[1][2].

According to the regulations of the Shanghai and Shenzhen Stock Exchanges, a cumulative deviation of closing price changes of 100% (or -50%) within 10 consecutive trading days, or a cumulative deviation of closing price changes of +200% (-70%) within 30 consecutive trading days, constitutes a case of severe abnormal price fluctuation[3].

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The core objectives of the halt-for-verification mechanism’s design are as follows[4]:

Function	Specific Explanation
Reduce Information Asymmetry	Facilitate the effective transmission of relevant information to investors, giving market participants more time to obtain and process information
Stabilize Prices	Avoid extreme imbalances between buy and sell orders, prevent market volatility, and promote the formation of a new equilibrium price
Maintain Market Order	Alert investors to abnormal matters or urge listed companies to make improvements
Protect Investor Interests	Provide investors with sufficient buffer time to consider the relationship between market prices and intrinsic value

The trading halt system in China’s stock market is divided into two categories[4][5]:

• Routine Trading Halt
  : Mandatory halt due to matters such as periodic reports and general shareholder meetings, accounting for 70.74% of all halts
• Warning Trading Halt
  : Halt implemented due to abnormal stock price fluctuations, which is the category that Fenglong Co., Ltd.'s recent halt falls into

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According to the empirical study “Implementation Effects of the Trading Halt System in China’s Stock Market” by Professors Liao Jingchi, Li Ping, Zeng Yong and others from the University of Electronic Science and Technology of China, the research results question the effectiveness of the halt-for-verification mechanism[5][6]:

1. Abnormal Trading Volume at Resumption
   • The trading volume of halted stocks at the time of resumption is significantly
     lower
     than the average trading volume on non-halt days

2. Increased Volatility After Resumption
   • Within one hour after resumption, the stock’s trading volume and price volatility are
     significantly higher
     than the average levels on non-halt days

3. Reduced Price Discovery Efficiency
   • Trading halts extend the time required for securities prices to incorporate information,
     delaying the price formation process
   • The
     information uncertainty is not eliminated at resumption
     , often leading to short-lived but sharp price fluctuations when trading resumes

Positive Effects	Negative Effects
Provides a cooling-off period to ease market panic	Interrupts trading, depriving traders of opportunities to learn from continuous trading
Encourages investors to rationally evaluate information	Reduces price discovery efficiency
Inhibits speculative arbitrage and insider trading	Increases trading volume and price volatility after resumption
Protects the interests of information-disadvantaged traders	Relatively high halt frequency and long halt duration

Compared with mature overseas markets, China’s trading halt system has the following characteristics[4][5]:

• Relatively high halt frequency
  and
  long halt duration
• Places relatively more emphasis on “stock price stability”, while the Hong Kong Stock Exchange prioritizes “equal access to information”
• The one-hour halt for abnormal fluctuations no longer serves its original purpose of providing a buffer period for ordinary investors

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From the perspective of the Fenglong Co., Ltd. case, the following issues exist:

1. Timeliness of Information Disclosure Issues
   • The company only first hinted at the possibility of applying for a halt-for-verification on January 8, 2026, after 9 consecutive limit-up trading days[2]
   • Market speculative sentiment had already fully developed during the consecutive limit-up period

2. Insufficient Fundamental Support
   • The company clearly announced that the stock price had “seriously deviated from the company’s fundamentals”[1]
   • However, it did not disclose any specific major positive information

3. Lag in Institutional Implementation
   • The halt-for-verification was only initiated after 12 consecutive limit-up days, giving speculative funds sufficient time to exit their positions

Based on historical cases and empirical research, the following situations usually occur after the resumption of trading following a halt-for-verification:

Price Trend Forecast After Resumption (Based on Historical Patterns):
┌──────────────────────────────────────────────────┐
│  Early Resumption Period: Possible catch-up decline or sharp volatility │
│  Short-Term Trend: Concentrated risk release, sharp pullback in stock price │
│  Mid-Term Performance: Price regresses to intrinsic fundamental value │
└──────────────────────────────────────────────────┘

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Problem Type	Specific Performance	Impact Level
Time Lag Issue	High trigger thresholds allow speculative funds sufficient time to enter and exit positions	High
Information Asymmetry	Insufficient information release during the halt period	High
Vague Implementation Standards	Halt timing and duration depend on subjective judgment	Medium
Resumption Shock	Increased price volatility after resumption	High
Risk of System Abuse	Some companies use trading halts for market value management	Medium

• Sends a clear risk warning signal
• Suspending trading prevents investors from chasing high prices in extreme emotional states
• Provides regulatory authorities and the company with time to verify whether there are any violations

• Retail investors often enter high-position holdings before the trading halt
• Unable to trade during the halt, funds are locked up
• The risk of catch-up declines after resumption is mainly borne by retail investors

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1. Lower Trigger Thresholds
   • Appropriately reduce the number of consecutive limit-up days required to trigger a halt-for-verification from 10 days
   • Establish a dynamic monitoring mechanism for price increase deviation values

2. Strengthen Information Disclosure
   • Require companies to continuously disclose the progress of major matters during the halt period
   • Establish a penalty mechanism for untimely information disclosure

3. Introduce Market Short-Selling Mechanisms
   • Enrich short-selling tools to balance the forces of long and short sides
   • Conducive to improving price discovery efficiency

4. Differentiated Regulation
   • Strengthen real-time monitoring of stocks with abnormal fluctuations
   • Take restrictive measures against accounts suspected of market manipulation

In view of the systemic risks faced by investors under the current mechanism, the following recommendations are made:

• Rational Investment
  : Avoid blindly chasing stocks with consecutive limit-up days
• Risk Awareness
  : Fully understand the trading risks of the secondary market
• Diversified Investment
  : Avoid excessive concentration in a single target
• Information Verification
  : Pay attention to the company’s fundamentals and information disclosure

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The A-Share halt-for-verification mechanism after consecutive limit-up days has

in , mainly due to the following reasons:

1. Flaws in Mechanism Design
   : High trigger thresholds and lagging implementation fail to curb speculation in a timely manner
2. Unsatisfactory Empirical Effects
   : Academic research shows that the trading halt system reduces market efficiency and increases volatility after resumption
3. Prominent Information Asymmetry
   : Insufficient information release during the halt period prevents investors from forming reasonable expectations
4. Limited Investor Protection Effects
   : Investors who chased high prices before the halt still have to bear the risk of price declines after resumption

Systematic reforms should be carried out from multiple dimensions including institutional design, implementation standards, information disclosure, and short-selling mechanisms to truly exert the role of the halt-for-verification mechanism in protecting investors and maintaining market order. Relying solely on halt-for-verification cannot fundamentally solve the problem of excessive speculation in the A-Share market; it needs to be combined with other regulatory measures and improvements to market mechanisms.

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[1] Securities Times - “Fenglong Co., Ltd.: Will Apply for Trading Halt for Verification of Stock Price Fluctuations” (January 13, 2026)
[2] Securities Times - “9 Consecutive Limit-Up Days for Fenglong Co., Ltd.: The Company May Apply for a Halt-for-Verification if the Stock Price Further Rises Abnormally in the Future” (January 8, 2026)
[3] Caiwen - “Fenglong Co., Ltd. with 12 Consecutive Limit-Up Days Voluntarily Applies for Trading Halt, Expected to Last No More Than 3 Trading Days” (January 13, 2026)
[4] Shanghai Stock Exchange - “Legal and Logical Thoughts on Trading Halts and Resumptions for M&A and Restructuring of Listed Companies in China”
[5] Liao Jingchi, Li Ping, Zeng Yong - “Empirical Research on the Implementation Effects of the Trading Halt System in China’s Stock Market” ( Management World, Issue 2, 2009)
[6] Journal Press of Shanghai University of Finance and Economics - “‘National Team’ Shareholdings and Abnormal Trading Halts of Listed Companies”