Major shareholders’ massive selling unlikely: regulator

The China Securities Regulatory Commission said that it would consider restricting the proportion of shares that major shareholders could sell during a given period of time.

The CSRC dismissed concerns of an upcoming massive share sell-off by major shareholders of listed companies as restrictions against selling their stocks will expire soon.

On Tuesday China’s securities regulator said that the “circuit breaker” mechanism created to contain wild swings in the markets calmed down investors and played a positive role in protecting their rights in Monday’s trading. The falls on Monday triggered drops in markets in the US and Europe but, after briefly plunging again in early afternoon trading on Tuesday, the main Shanghai Composite Index recovered to finish the day just 0.26 percent lower.

The China Securities Regulatory Commission also defended the functioning of the new “circuit breaker” policy that caused Chinese stock markets to suspend trade on Monday after markets fell 7 per cent, triggering the mechanism on the very first day it came into effect.

China’s central bank injected a massive $20 billion in cash through open market operations in the morning, and forex traders said it also intervened to stabilise the sliding yuan, which some blamed for aggravating Monday’s slump.

It was the first time China used the “circuit breaker” mechanism it announced late a year ago. In Hong Kong, meanwhile, the Hang Seng Index, which also fell by more than 2 percent on Monday, was down some 0.5 percent in mid-afternoon trading, on continuing anxieties about the Chinese economy. The ban on sales by the holders of more than 5 percent stakes in companies was introduced last summer to help stem the market collapse, but is due to end this Friday.

And the continuing decline of the Chinese yuan against the dollar is also seen as encouraging Chinese investors to take money out of Chinese stocks at present.

However, long-term success is far from assured, analysts and investors warned.

“We’ve been waiting for a market drop like this for a long time”, said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management Co.

The CSRC seems willing to bend its rules, saying in the same statement that the new circuit breaker is meant to reduce volatility and it was willing to “improve relevant systems” since China is still experimenting with the circuit breakers.

The experience has further rattled some retail investors – who dominate transactions on Chinese exchanges.

China stocks rose on Tuesday as financial regulators and the central bank moved aggressively to restore confidence a day after a plunge roiled global markets.