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Buffett sells BYD? Case solved.

1. What is CCASS?

Before discussing this question, it is necessary to understand a basic concept:

The settlement of Hong Kong stock trading is ultimately carried out through the Central Clearing and Settlement System (CCASS) used by each individual's securities account.

In addition to the securities accounts of brokerage firms, this settlement system also allows individual investors to hold stocks directly through CCASS. Through the CCASS system, we can see:

(1) The quantity and changes of stocks held by intermediaries acting on behalf of clients.

(2) Individual investors who hold stocks directly through CCASS without going through brokerage firms or brokers (additional fees may apply). However, whether these individual investors are willing to disclose their account names depends on their own preferences.

Therefore, when buying or selling shares, it is essentially transferring ownership between different accounts within the CCASS system. Apart from these two types of accounts, there are also:

(3) Some shareholders who do not trade and some convertible bonds that have not been converted, which will not be reflected in the system.

In addition, since CCASS operates on a T+2 trading basis, the transaction records shown in CCASS actually represent the trading conditions two days ago. In addition to regular buying and selling, the position changes in the CCASS system may occasionally involve transfers, increases, stock splits, mergers, rights issues, and so on.

Let's take the structure of BYD (stock code:$BYD.CN,$BYD COMPANY.HK) in the CCASS system on July 7th (corresponding to the trading records of July 5th) as an example:

(1) BYD has a total of 1.098 billion shares in the Hong Kong stock market, of which the number of shares held in named accounts in CCASS is 870 million.

(2) Within the CCASS system, there are only 390,000 shares held in anonymous accounts.

(3) Outside the CCASS system, there are approximately 226 million shares held by shareholders in physical form that are not registered in the CCASS system.

Obviously, shareholders like BYD who do not enter the CCASS system are likely to be long-term shareholders who do not trade at all, because according to the rules of the Hong Kong Stock Exchange, shareholders still need to go through intermediaries such as brokerage firms when buying or selling shares. And only in this way can the Hong Kong Stock Exchange monitor whether shareholders holding a certain amount of shares have made the required disclosures when adjusting their positions. For example, if the Hong Kong Stock Exchange requires shareholders holding more than 5% of the shares to disclose every 1% cumulative change.

This means that shareholders who are not registered in the CCASS system, whether they are transferring or buying and selling when the transaction is approaching, must first enter the CCASS system to register their shares.

2. Why is it said that this change in Citigroup's shareholding must be Buffett's?

(1) According to information from the website tracking CCASS changes, of the HKD 1.1 billion worth of BYD shares on July 7th, approximately 20.5% (225.6 million shares) were outside the CCASS system.

(2) By July 11th, these shares had all entered the CCASS system, corresponding exactly to the additional 225 million shares in Citigroup's account.

(3) At the same time, according to the shareholding information of BYD shareholders on the Dolphin app, Buffett's Berkshire Hathaway holds 7.74% of BYD's shares. Based on BYD's total share capital of 2.911 billion shares in Hong Kong and A shares, Berkshire Hathaway's shareholding is 225 million shares.

(4) In addition, according to BYD's financial report, Berkshire Hathaway Energy, a wholly-owned subsidiary of Buffett's Berkshire Hathaway, is the fourth largest shareholder of BYD, holding 225,000,000 shares, accounting for 7.73% of the total shares.

Putting (1)-(4) together, a very obvious conclusion is that Berkshire Hathaway has started to register its shares that were originally outside the CCASS system into the CCASS system.

Of course, Berkshire Hathaway has not made any changes at the moment, which corresponds to BYD's response to the rumors of major shareholders reducing their holdings today: "According to the relevant rules of the Hong Kong Stock Exchange and the Securities and Futures Commission, major shareholders need to make equity declarations. Checking the Hong Kong Stock Exchange's equity disclosure platform, no reduction information is displayed, and the shareholder's equity declaration shall prevail."

BYD's response indicates that Berkshire Hathaway has indeed not reduced its holdings at present. It has only transferred the NON-CCASS shares to CCASS, similar to assuming a ready position before starting a race. But what is the next step after entering the CCASS system? Is it a reduction or a transfer of shares?

Considering the previous cases of Meituan, where the co-founders reduced their holdings after entering the CCASS system, and the recent sharp decline of SenseTime after the lifting of the lock-up period, where major shareholders crazily reduced their holdings, it is clear that shares were transferred from Non-CCASS to CCASS in advance to prepare for the reduction. This risk of major shareholder reduction poses a threat to small shareholders of BYD, and they must be cautious.

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