Business Standard

China bans net stock sales at open, close

Attempt to prop up market; move affects major institutio­nal investors


China has banned major institutio­nal investors from reducing equity holdings at the open and close of each trading day, part of the government’s most forceful attempt yet to prop up the nation’s $8.6 trillion stock market.

The order from China’s securities watchdog was recently delivered to major asset managers and the proprietar­y trading desks of brokerages, according to people familiar with the matter, who asked not to be named because they weren’t authorised to speak publicly. The China Securities Regulatory Commission, led by newly appointed Chairman Wu Qing, has also created a task force with the nation’s stock exchanges to monitor short selling and issue warnings to firms that profit from the wagers, the people said.

While authoritie­s have been ratcheting up curbs on bearish bets for months, the ban on net selling at the open and close represents a notable tightening of the government’s grip on market activity that risks upending popular strategies used by hedge funds and other institutio­nal investors. Firms affected by the ban are unable to sell more shares than they buy during the first and last 30 minutes of trading, the people said.

It’s unclear how widely the ban is being applied across the financial industry, and there’s no indication it will affect individual investors who account for a large portion of volume in Chinese stocks. Still, the sidelining of major institutio­ns during two of the most closely watched parts of the trading day may make it easier for government-backed funds to influence the market — especially the closing levels for benchmark indexes.

The CSRC didn’t immediatel­y respond to a faxed request for comment.

Known for his tough clampdowns on brokerages as a CSRC official in the mid-2000s, Wu is resorting to more drastic measures to prevent the stockmarke­t slump from extending into a fourth year.


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