Big shareholders must hold shares for 6 months: CSRC

By Ken Sweet, The Associated Press on July 8, 2015.

Beijing has implemented an drastic series of measures to stabilise the market, including ordering shareholders with stakes of more than 5 percent to stop selling shares for the next six months.

Historically, there hasn’t been much parallel pacing between China’s stock markets and its economy, said Bill Adams, senior global economist at PNC Financial Services.

There have been signs of overheating in China for a while.

“The concern is that the popping of this bubble may seriously crimp the already slowing Chinese economic growth rate”, said Briefing.com. Many borrowed heavily to buy stocks, taking out so-called margin loans. The government’s toughest measures came on June 12, when China’s securities regulator announced a new limit on the total amount of margin lending stock brokers could do, while also reiterating the ban on illicit margin trading through mechanisms like umbrella trusts. It will pay up to 18.80 yuan per A-share and up to HK$17.18 ($2.22) per H-share. Hong Kong was No. 2 with 31 deals that raised $16 billion. But the impact of the collapse on America’s balance of payments with China is likely to be unfavorable, increasing a gap of $30.5 billion.

In the latest salvo against short sellers, who bet on falling prices, Xinhua said in a post on its official microblog that the authorities would “punch back” with a “big fist” against illegal activities, without giving any details.

After hitting a peak last month, Chinese stocks have been in free-fall. The Shanghai Composite Index jumped the most since 2009 after Wednesday’s 5.9 percent slump.

Chinese authorities and financial institutions have undertaken coordinated actions to stem the bleeding in the equity markets, but it appears that sentiments were hardly swayed.

But what makes China’s stock story unusual is how rapidly prices soared and then fell, as well as the Chinese government’s not-so-invisible hand in the matter.

But the big players are no longer immune as the emergency measures don’t work and the panic selling begins to spread to other Asian markets.

Observers say the market’s lacklustre response could shake faith in the government, especially its ability to handle a crisis.

Two major Chinese financial markets, the Shanghai Composite and Hong Kong’s Hang Seng were down Wednesday.

A Chinese investor covers her eyes Wednesday at a brokerage house in Nantong, Jiangsu province, China.

The Party appealed to its citizen’s patriotism and desire for wealth by directing the media to publish commentaries extolling the virtues of buying stock. The risk of contagion to global markets is limited, given the small number of foreign investors in China’s mainland stocks, but the crash is a growing threat to the world’s No. 2 economy and its fastest-growing one.

But another analyst, Mark Williams of Capital Economics, said, “There is a good chance that the market rescue efforts are seen to be a failure in a few months’ time”. Target-date mutual funds have become a popular way to save for retirement because they take care of how to invest a nest egg, and most hold some Chinese stocks.

An employee at Shenwan Hongyuan Securities said that at morning meetings operations departments were being told by managers to help stabilise markets, which have lost more than $4 trillion since the start of June – or four times what the German stock market is worth.

With millions of retail investors and their money at stake, the hope now is for the market to stabilise soon.