MARKET MOVES
Big shareholder stock sales dip on new rules
BEIJING — Stock sales by major shareholders shrank sharply over the past several trading days, pointing to the effect of tightened rules aimed at limiting massive dumping of holdings and bolstering the market.
The average daily stock sales volume by major shareholders, supervisors and management of companies listed at the Shanghai Stock Exchange fell to 190 million yuan ($28 million) on the secondary market during the three trading days ending on Friday.
This was down 67 percent from the daily average over the period from Jan 1 to May 26, the last trading day before the new rules were issued, according to data from the bourse.
No major shareholders, supervisors or management sold shares in blocks over the past three trading days, and the initial effects of the rules to curb disorder ly stock sales had emerged, the bourse said in a statement.
Massive stock selling by major shareholders when share prices peak is widely deemed a factor weighing on the market. Big shareholders, supervisors and management at 278 listed companies at the SSE have sold shares worth around 90 billion yuan so far this year, according to data from the bourse.
Compared with individuals, major shareholders, supervisors and management have the advantage of asymmetric information, so offloading stocks in a fire sale manner causes retail investors to suffer.
To ease market worries, China tightened its grip on speculative stock selling by big shareholders, with the China Securities Regulatory Commission, and the Shanghai and Shenzhen bourses on May 26 coming up with new regulationsto fix some loopholes in the previous scheme.
To illustrate, stocks transferred through block trading should not surpass 2 percent of a company’s total shares in any 90 days, and the transferees are not permitted to sell any more within six months, according to the new rules.
“The new rules will slow the pace of offloading, which will stabilize the market and support growth of companies with stable profitability outlooks,” said Sun Xiwei, chief investment strategist at CITIC Securities Co.