China Gets Tough on Insider Selling to Arrest Market Slump

livemint.com:

Chinese regulators have taken a novel approach to prop up the country’s faltering stock market by banning many companies’ biggest shareholders from selling. The country’s $11 trillion domestic stock market has slumped this year after a post-Covid rally, hurt by a weak economy, an outflow of foreign money and a rising sense of nervousness among small investors. The CSI 300 index of the country’s largest listed companies is down 4.1% in the year-to-date period, following losses in the previous two calendar years.

Authorities in China have taken several steps to boost the market recently, including cutting a tax on stock trading and slowing the pace of new listings to help balance supply and demand. The country’s securities regulator has also curbed share sales from controlling shareholders of listed companies that haven’t paid dividends in the past three years, or whose shares are trading below their IPO prices or net asset values. The new rules effectively placed share-sale restrictions on about half of the 5,000-plus companies that trade in Shanghai or Shenzhen, according to Wind, a provider of financial data.

Major shareholders of all listed companies were also encouraged to maintain their ownership stakes or lock up their shares for longer periods. Shareholders of more than 200 companies sprang into action by canceling plans to trim stakes, making public promises not to reduce their holdings further and extending lockup periods for their shares. Dozens of other companies proposed buybacks that could help support their share prices.