Date
30 May 2017
State investors including the Ministry of Finance pledged not to reduce their holdings in China's Big Four banks, including Bank of China. Photo: Bloomberg
State investors including the Ministry of Finance pledged not to reduce their holdings in China's Big Four banks, including Bank of China. Photo: Bloomberg

China bans big investors from cutting stakes for next 6 months

China’s securities regulator took the drastic step of ordering shareholders with stakes of more than 5 percent from selling shares for the next six months in an attempt to halt the plunge in stock prices, Reuters reported.

The China Securities Regulatory Commission (CSRC) said on its website late Wednesday it would deal severely with any shareholders who violated the rule.

Separately, major shareholders of top Chinese banks and companies including Sinopec Ltd. (00386.HK) pledged to either maintain their holdings or increase their stakes in the listed firms.

The announcements came after China’s stock market showed signs of seizing up Wednesday, as companies scrambled to escape the rout by having their shares suspended and the CSRC warned of “panic sentiment” gripping investors.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index dropped 5.9 percent.

More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China’s market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.

“The concern, that is a real one, is what does it mean about long-term growth in China,” US Treasury Secretary Jack Lew said at an event Wednesday in Washington on financial stability.

More than 500 companies announced trading halts on the Shanghai and Shenzhen exchanges Wednesday, taking total suspensions to about 1,300 — 45 percent of the market or roughly US$2.4 trillion worth of stock — as the firms sought to sit out the carnage.

“I’ve never seen this kind of slump before. I don’t think anyone has. Liquidity is totally depleted,” the report quoted Du Changchun, an analyst at Northeast Securities, as saying.

“Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips.”

The Ministry of Finance and state investor Central Huijin Investment Ltd. pledged not to reduce their shareholdings in the country’s Big Four banks — Industrial and Commercial Bank of China Ltd. (01398.HK), China Construction Bank Corp. (00939.HK), Agricultural Bank of China Ltd. (01288.HK) and Bank of China Ltd. (03988.HK).

Sinopec, Asia’s largest oil refiner, said in a filing Wednesday that its controlling shareholder, Sinopec Group, had increased its stake in the listed company by buying 46 million A shares in Shanghai, or 0.04 percent of the total issued share capital.

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