BEIJING — Chinese regulators have renewed restrictions on the amount of stock major corporate shareholders can sell as authorities move to allay panic among equity investors.
Starting Jan 9, major investors are permitted to sell no more than 1% of a company’s shares on the open market in three months, the China Securities Regulatory Commission said in a statement on Thursday.
The rule doesn’t apply to transactions such as block trades and transfer agreements, and replaces an existing six-month ban on any secondary market sales that was due to expire Friday, it said.
“This is a positive for the stock market because fears that major shareholders may start cutting stakes when the ban expires were an important factor behind the stock market’s falls this week,” said Zhang Yanbing, a Shanghai-based analyst at Zheshang Securities Co.
The Shanghai Composite Index tumbled 6.9% on Monday and on Thursday slid another 7.3% before automatic circuit breakers halted trading for the day. Investors were rocked last summer by a 43% rout in the index, which prompted government support including the CSRC’s previous ban on stock sales by major shareholders. The benchmark gauge has now lost 40% from its peak last June.
The CSRC’s new limit only applies to disposals made through aggregate auctions on the open markets and major shareholders are required to give a 15-day notice before they do so, the regulator said.
The new rules are aimed at ensuring “legal and orderly” disposals by major holders, the regulator said. Their implementation doesn’t mean state funds will exit from the market and there will be no change to their roles of stabilising equities.
“The new rules will help form stable market expectations and defuse panic sentiment,” the CSRC said. “The implementation of the new rules will not lead to waves of selling and there’s no basis that they will lead to sharp declines in the stock market.”
Asian bourses swoon
Southeast Asian stock markets fell along with Asian stocks after China opted to keep guiding the yuan sharply lower, with energy shares leading the pack due to a tumble in global oil prices.
Losses in top energy-related firms such as Thailand's PTT and Singapore's Keppel Corp helped drag the SET index and the city-state's Straits Times Index over 2% lower at one point.
The Stock Exchange of Thailand main index sank 1.54%, or 19.39 points, to 1,240.65 at midday on Thursday. Total trading value was 24.23 billion baht.
SET50 index plummeted 2.20%, or 17.41 points, to 772.61 in trade worth 17.55 billion baht.
MAI retreated 1.18% or 5.97 points, to 500.98, in transaction value of 477.60 million baht.
Asian stocks, measured by MSCI's broadest index of Asia-Pacific shares outside Japan, dropped 2%.
Rising risk aversion over China overshadowed positive economic data in the region, including a further recovery in Thai consumer confidence in December and Philippine budget surplus in November.
"The selling was mainly due to the weak sentiment in China. The Thai stock market saw relatively moderate trading volumes this morning because of more short sellers playing the bear market," said an equity dealer with BT Securities in Bangkok.
The Philippine index hovered near a more than three-week low, Malaysia retreated after two days of gains and Vietnam hit a two-week low.
Stocks in Indonesia reversed the rally on Wednesday. It hit a more than two-month high the day before as easing inflation data underscored the prospect of low interest rates.
Broker Bahana Securities said it expected a 25 basis point cut in Bank Indonesia's policy rate in the first quarter of 2016 for a total decline of 75 basis points to 6.75% for 2016.
"This would be one of the biggest rate cut in the region in 2016," said Harry Su, head of corporate strategy and research, in a report.