China bans big shareholders from cutting stakes for next six months

Wed Jul 8, 2015 6:47pm EDT
 
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By Samuel Shen and Brenda Goh

SHANGHAI (Reuters) - China's securities regulator took the drastic step of ordering shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices that is starting to roil global financial markets.

The China Securities Regulatory Commission (CSRC) said on its website late on Wednesday that it would deal severely with any shareholders who violated the rule.

Separately, major shareholders of top Chinese banks including ICBC (601398.SS: Quote) 1398.HK and companies including Sinopec (0386.HK: Quote) (600028.SS: Quote) (SNP.N: Quote) pledged to either maintain their holdings or increase their stakes in the listed companies.

The announcements came after China's stock market showed signs of seizing up on Wednesday, as companies scrambled to escape the rout by having their shares suspended and the CSRC warned of "panic sentiment" gripping investors.

The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent on Wednesday, while the Shanghai Composite Index .SSEC dropped 5.9 percent.

More than 30 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China's market turmoil will destabilize the real economy is now a bigger risk than the crisis in Greece.

Indeed, the Obama administration is worried the stock market crash could get in the way of Beijing's economic reform agenda.

"The concern, that is a real one, is what does it mean about long-term growth in China," U.S. Treasury Secretary Jack Lew said on Wednesday at an event in Washington on financial stability.   Continued...

 
Investors look at computer screens showing stock information at a brokerage house in Shanghai, China, July 8, 2015. REUTERS/Aly Song