The restrictions were announced as stocks tumbled 7 percent half an hour into trade, triggering a newly-introduced circuit breaker.
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Stockholders who own more than 5 per cent of a company will be required to sell shares through private transactions to “avoid shocks to the market”, the China Securities Regulatory Commission said.
China’s securities regulator will extend a six-month ban on stock sales by major investors after the country’s main stock indexes began 2016 with rapid declines spurred by data indicating a sustained slowdown in economic growth, according to various media sources. While the CSRC reiterated that circuit breakers play an important role in stabilising the market, Citigroup, Deutsche Bank and Nomura Holdings said the rules failed to restore calm on Monday as investors scrambled to exit positions before getting locked in by the halts.
The CSRC also stressed that the “national team” – which buys stocks at behest of the government – “will not quit” and its function to stabilise the market will not change.
In addition, major shareholders must file their plans 15 trading days in advance of sales.
It bars sales by shareholders or senior executives who hold more than five percent stakes of the company, and traders have anxious that if it was lifted a wave of pent-up selling pressure would hit China’s volatile exchanges.
Alberto Forchielli, founder of Mandarin Capital Partners, said: “This is insane”. Shares bought from the secondary market are not subject to the regulation.
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Chinese markets are jittery after the benchmark index fell nearly 7 percent on Monday.
