Beijing Curbs Major Shareholder Selling After China Triggers Circuit Breaker Again

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. Financial analysts have warned that would lead to a new round of selling and more volatility.

China’s equity markets were also suspended on Monday, after plunging by their daily 7 percent threshold, with stock transactions halted for the day.

An hour before Thursday morning’s CSRC announcement, the circuit breaker shut down the mainland stock markets for the second time at 9.58am, after just 13 minutes of trading.

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 percent, triggering the mechanism on the very first day it came into effect.

The blue-chip CSI300 index ended up 0.3 percent at 3,478.78 points after bouncing in a 4 percent range, while the Shanghai Composite Index dipped 0.3 percent to 3,287.71 points.

“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. “They shouldn’t worry as stock prices go up or down”.

He took advantage of the mild bounce on Tuesday to exit his position, saying he had “learned a lesson in blood”.

Thursday’s trading was the shortest duration in China’s capital market history.

The trading rules were triggered on Monday as stocks plunged in their worst-ever start to a year.

Some analysts said the rules were less draconian than expected, as the restrictions do not apply to shares acquired in the secondary market, or share sales outside the exchanges’ bidding system, such as block trades, or negotiated transfers.

A lockup on an estimated 1.2 trillion worth of shares held by major institutions, imposed as a stability measure during last summer’s market crash, is set to expire next Monday.

“Further government intervention on a big scale would amount to injustice in a market whose reputation has already been suffering”, said Yang of Kaiyuan Securities.