SHANGHAI/HONG KONG, Jan 7 China’s securities regulator issued rules on Thursday to restrict share sales by listed companies’ major shareholders, seeking to arrest the market’s free-fall, but the move threatens to further weaken investor confidence.
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Under the circuit breaker system, markets were suspended for 15 minutes if the CSI 300 index of Shanghai and Shenzen stocks fell by five per cent.
The trading rules, which halt exchanges for 15 minutes after a 5 percent drop in the CSI 300 Index and for the rest of the day after a 7 percent retreat, were triggered on Monday as stocks plunged in their worst-ever start to a year. “We are also feeling at a loss and confused today as we didn’t quite figure out what was going on in the market”, he said.
Chinese regulators have imposed a limit on the amount of stock major corporate shareholders can sell as authorities move to curb the nation’s stock-market rout.
The market benchmark more than doubled between late 2014 and its June 12 peak as millions of novice investors bought shares.
“It seems the CSRC is likely to extend the ban, or introduce other mechanisms to reduce a big sell-off by major shareholders, particularly under the current situation when markets are so volatile”, an unnamed senior analyst with a Shanghai based state-owned brokerage told the South China Morning Post. “Investors need time to adapt to the new rules”. Obvious signs of intervention were absent on Thursday, even after share purchases by state-controlled funds on Tuesday helped the CSI 300 eke out a 0.3 per cent gain.
The new measures came before the six-month share reduction ban on large shareholders is set to expire Friday.
Mr Chen says he will not get back into the market until regulators improve the circuit-breaker system. “This is insane”, Mr Chen said on Thursday.
Then again, Kelvin Tay, the regional chief investment officer at UBS Group AG’s wealth management business in Singapore, sees a buying opportunity.
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Some other managers could not sell fast enough.
