China’s market regulator Thursday extended restrictions on big shareholders selling stocks, on whom a ban had been due to expire at the end of the week, as trade was suspended in the morning following a seven percent plunge.
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The country’s securities regulator said on its microblog big shareholders will be required to sell through private transactions to avoid flooding the market with shares.
The agency also ruled that large shareholders must disclose their share reduction plans to the exchanges 15 trading sessions in advance.
While the CSRC reiterated that circuit breakers play an important role in stabilising the market, Citigroup, Deutsche Bank and Nomura said the rules failed to restore calm on Monday as investors scrambled to exit positions before getting locked in by the halts.
Authorities say shares bought by state companies will be transferred to China’s sovereign wealth fund to avoid depressing prices by selling them in the open market.
A Chinese investor looks at a screen showing stock movements at a stock brokerage house in Beijing, China, 05 January 2016.
The circuit-breaker system is new to China.
Nevertheless, he felt market intervention would only hit investor confidence in the long run. If the Hushen 300 rises and declines by over 7 percent, trading is halted for the day.
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“There are huge risks to introduce it in China now as irrational, retail investors are not really for it. When they see the market fall by 3%, they will only want to sell rather than buy”. One wag, presumably male, said the new circuit breakers were like having a girlfriend with a bad temper: “If she’s angry with you and you fail to cheer her up in 15 minutes, she won’t be talking to you for the rest of the day”.
