(Reuters) – Major shareholders of companies listed on the Beijing Stock Exchange are de facto blocked from selling their shares, a new measure taken by the exchange platform aimed at limiting downward pressure on prices that could threaten the recent rally, according to three sources close to the matter.
The platform, launched two years ago, was created to facilitate the financing of small innovative companies, nicknamed the “little giants”, but is failing due to a lack of interest from investors.
The 50 index, which tracks the “little giants”, nevertheless jumped 46% in November thanks to the measures taken by the authorities. These included lowering the minimum fund amount for investing in the stock markets, improving trading mechanisms and encouraging mutual funds to invest in the market.
Under the rules currently in force on Chinese stock exchanges, a “significant shareholder” is defined as holding a stake of 5% or more in the capital of a listed company, and is required to make a public declaration to the stock exchange platform whether he plans to sell securities.
The Beijing Stock Exchange refused to receive these declarations, according to the sources, preventing shareholders from selling their shares. The sources added that it is still uncertain how long these regulations would remain in effect.
The Beijing Stock Exchange and the China Securities Regulatory Commission did not immediately respond to requests for comment.
The Stock Exchange said in a statement Monday morning, before publication of this article, that it was closely monitoring market transactions to ensure normal operation.
The “window guidance”, directives given orally without written documents, aims to support the recent rally, according to the sources.
One noted that without these guidelines, rising stock prices “could prompt institutional shareholders to reduce their positions, which could cause the index to fall again.”
The Beijing Stock Exchange currently has 232 companies with a combined market capitalization of 366 billion yuan (47 billion euros).
For comparison, 2,256 companies with a total value of 47 trillion yuan are listed in Shanghai, compared to nearly 3,000 companies with a total capitalization of 31.9 trillion yuan listed in Shenzen. The Shanghai Composite Index is up 0.4% this month, while the Shenzhen Composite Index is down 0.8% in November.
(Report from Beijing and Shanghai offices, Corentin Chappron, edited by Blandine Hénault)
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