【Data Analysis】“Block Trades” as Warning Signals? Analyzing Insider Transfers and Changes in Stock Prices Using TEJ API
Highlight
- Article Difficulty：★☆☆☆☆
- Analyzing stock prices and insider transfers of Listed Companies in Taiwan
Preface
Amid the turbulent stock market today, the mysteries behind the fluctuations in corporate stock prices are worth delving into. Insider transfers reflect the company’s internal operations, management’s confidence in future development, and their assessment of the current economic environment. By analyzing the motives behind insider block trades, we aim to explore the relationship between stock prices and insider transfers. This article will utilize the TEJ API to focus on quantitatively analyzing the impact of insider transfers on the stock prices of listed companies in Taiwan.
Editing Environment and Module Requirements
This article uses the Windows 11 OS and VScode as the editor.
Database Usage
- TWN/ATRANS(Holding Transfer)
- TWN/ABSTN1(Number of Directors Holding)
- TWN/APRCD(TSE/OTC Unadjusted_Price(Daily))
- TWN/APRCD2(TSE/OTC Unadjusted_Price(Daily)-ROI)
Data Import
Obtaining insider declaration transfer data is imported from the directors and supervisors holding transfer database. The methods of transfers include various types such as regular trade, arranged with specific people, trust, gift, block trades, and trade the price after the plate. We precisely extract data from block trades.
import tejapi
import pandas as pd
import matplotlib.pyplot as plt
import plotly.graph_objects as go
from datetime import datetime, timedelta
from dateutil.relativedelta import relativedelta
tejapi.ApiConfig.api_key = "Your Key"
tejapi.ApiConfig.api_base = "https://api.tej.com.tw"
tejapi.ApiConfig.ignoretz = True
# Retrieve insider declaration transfer data and filter out information related to large transactions.
data_trans = tejapi.get('TWN/ATRANS',
# Securities code, declaration date, shareholder identity, transfer method, number of shares declared for transfer
opts = {'columns':['coid', 'mdate', 'clnm_e', 'tpnm_e', 'tns2']},
paginate = True)Establishing the total issued shares function, with data imported from the database containing the number of directors holding.
data_total = tejapi.get('TWN/ABSTN1',
coid = coid,
mdate = {'gte':gte, 'lte':lte},
opts = {'columns':['coid','fld003']}, # Total issued shares
paginate = True)Establishing the stock price function, with data imported from the database containing TSE/OTC unadjusted prices (daily).
# Retrieve the stock price function, with securities code and start/end dates set as variables
def data_stock_price(coid, start, end):
data_coid = tejapi.get('TWN/APRCD',
coid = coid,
mdate = {'gte':start, 'lte': end},
paginate = True,
opts = {'columns':['coid','mdate','close_d']})
# Security Code, Date, Closing Price
return data_coidData merging and visualization analysis
Considering that the total issued shares of a company may fluctuate at different points in time, set the company code and declaration date as variables to input into the total issued shares function. This will provide the total issued shares at the corresponding time point and calculate the percentage of shares declared for transfer (%).
Extract data for each stock with the highest percentage of shares declared for transfer.
Extracting stock codes and setting the time interval.
Synthesizing the above data and related news, this article summarizes the following four results, taking 3036, 6452, 3017, 2311, 2597, and 2723 as examples：
- The stock price subsequently plummeted, and the company did not provide any explanation after the block trades.
- WT MICROELECTRONICS CO., LTD. (3036) (2023/11/10)
- WT MICROELECTRONICS CO., LTD. is primarily engaged in the distribution business of semiconductor-related components. The company has expanded its scale by merging multiple IC channel distributors. It focuses on three primary research and development goals: AI deep learning and intelligent image recognition, optoelectronic system design, and motor control.
- Pharmally International Holding Company Limited (6452) (2018/10/16)
- Pharmally International Holding Company Limited made headlines due to a scandal involving embezzlement, resulting in the mass departure of top executives. Financial difficulties led to a suspension of trading, and the company was officially delisted on April 1, 2021.
2. The stock price experienced minimal fluctuations or was not significantly impacted by the transfer news. The company released news explaining the reasons behind the block trades.
- Asia Vital Components Co., Ltd (AVC) (3017) (2021/03/23) → Asia Vital Components Co. Ltd.
- AVC is a leading global manufacturer of Heat dissipation solutions for desktops (DT) and notebooks (NB). Initially focused on PC cooling products, the company has shifted its focus in recent years towards niche products, particularly in communication equipment and server Heat dissipation applications.
- In response to the release of shares by a significant shareholder, Japanese company Furukawa Electric, AVC stated that due to the impact of the 2020 pandemic, Japanese businesses generally faced operational challenges. The major shareholder disposed of the investment to improve the asset portfolio.
- ASE Technology Holding Co., Ltd. (2311) (2018/02/14) → ASE Technology Holding Co. Ltd.
- ASE Vice Chairman Zhang Hongben plans to transfer all of his ASE stocks. ASE stated that this decision is part of Zhang Hongben’s personal trust financial planning and does not involve any actual sale or release of ASE shares.
3. The stock price has slightly increased, and positive news has been released to explain.
- Ruentex Engineering & Const.Co (REC) (2597) (2019/10/23) → Ruentex Engineering & Const.Co
- Ruentex Industries aims to simplify the group’s organizational structure through block trades to subscribe to the REC stocks sold by its subsidiary. After the transaction, Ruentex Industries’ total holdings in REC will increase to 12,600, with a shareholding percentage of 9.35%.
- The stock price of REC (2597) has increased slightly, speculating that it is due to the release of news explaining the internal block trades, where the parent company subscribes to the stocks.
4. The stock price experienced a significant decline, but there is a trend of recovery after the release of the news：
- Gourmet Master Co. Ltd. (2723) (2023/03/24) → Gourmet Master Co. Ltd.
- Gourmet is the holding company of the well-known coffee roasting chain 85°C Group. Its main products include coffee, bread, and pastries, making it a diversified food and beverage chain retailer.
- Gourmet released a statement indicating that the ‘internal stock transfer’ is to ‘introduce international long-term investors,’ and the declared shares have been fully transferred.
Observe the stock price changes and returns the next business day after each stock declaration date.
We want to understand the changes in stock prices and returns after each stock declaration transfer. By calculating the next business day after the declaration date, we aim to observe whether the movement is positive or negative or if the stock price remains unaffected.
Analyze the statistical results and Insider transfers findings.
Calculate the number of daily return rates, categorizing them as positive if greater than 0, negative if less than 0, and zero if equal to 0.
The chart above represents the proportion of change rates in the closing prices on the next business day after the declaration date. It is evident that negative changes still dominate, accounting for nearly 50%. We can intuitively observe that investors are more inclined to withdraw funds when facing uncertainty. Positive changes or no changes are also possible, depending on whether the company provides explanations and the content of those explanations. In the earlier example, if the company does not release news, it may lead to a decline; on the contrary, if the company explains promptly, there is a possibility of no change or an increase.
Conclusion
From the data perspective, the impact of block trades on stock prices is worth paying attention to. We observe that after internal stock transfers, the short-term price changes mainly exhibit a negative trend, indicating that the market has a certain level of concern and uncertainty regarding such transactions.
However, what’s interesting is whether companies proactively release news explanations when facing large internal transactions, which has become a crucial factor influencing stock price volatility. Taking examples of WT MICROELECTRONICS CO., LTD. and Pharmally International Holding Company Limited, the lack of explanations led to a sharp decline in stock prices. On the other hand, ASE Technology Holding Co., Ltd. and Asia Vital Components Co., Ltd. were less affected due to timely explanations. Ruentex Engineering & Const.Co successfully stabilized stock price volatility by explaining the parent company’s subscription of stocks. Gourmet Master Co. Ltd. experienced a sharp decline after the transaction, but the news of introducing international long-term investors gradually stabilized the stock price.
Overall, block trades do serve as a market signal. However, transparency and timely explanations from companies when dealing with large internal transactions are crucial in mitigating market concerns and maintaining investor confidence. Therefore, while investors track block trades, they should also closely monitor the public explanations provided by companies for a more comprehensive assessment of their impact on stock price volatility.
This implementation analyzes insider transfers using the TEJ API. Using the data provided by TEJ API, we can implement various types of analysis as far as we can imagine. This approach saves time and effort and furnishes investors with a more diversified evaluation method. Explore more related solutions in TEJ E-Shop. Construct your trading strategy with a high-quality database.
Reminder: The strategy is only for reference and does not represent recommendations or advice on any financial products and investments.
