"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.