China's securities regulator late yesterday ordered shareholders to sell
stocks on the block trading system if they expect to sell a large amount of
shares that were freed from the lock-up period.
When more than one percent of a listed firm's total shares are sold within a
month, the holders should use the block trading system, the China Securities
Regulatory Commission said.
Analysts say the measure is a move to shore up the stock market, after the
benchmark Shanghai Composite Index plunged by 49.5 percent from its all time
high in October.
Investor sentiment was weak on the lingering concerns that the huge amount of
such shares would flood the market for cash and therefore sink share prices.
"If such shares are all to be traded on the bid trading system, the trading
will be low-efficient as the volume is often restricted by the buying interest
on the secondary market," a CSRC spokesman said in a statement.
"The trading will also exert huge pressure on the share prices and twist the
pricing mechanism," the spokesman stated.
"The move will help to ease the pressure on the secondary market and the
impact on the pricing mechanism on the bid trading system, and to stabilize
investors expectations on the reduction of the holdings of such shares."
The move is an experience learnt from the mature market to promote a stable
and healthy development of China's emerging and transitional capital market,
said the spokesman.
The country's stock market is faced with more complicated internal and
external factors, the spokesman noted, adding the external factors include the
recent huge volatility on the global financial market, its bigger impact on the
emerging markets, and the sustained price rises of energy, resources, and grain.
The external factors have also affected the judgement and sentiment of
domestic investors, the spokesman stated.