BEIJING, China – China plans to restrict stock sales by large shareholders once a ban imposed in July to stop a slide in prices is lifted this week.
Stockholders who own more than 5 per cent of a company will be required to sell shares through private transactions to “avoid shocks to the market,” the China Securities Regulatory Commission said on its microblog.
Regulators are winding down emergency measures imposed after China’s main market index plunged more than 30 per cent in June.
The six-month ban imposed on sales by large shareholders expires Thursday. Financial analysts have warned that would lead to a new round of selling and more volatility.
Markets are jittery after the benchmark fell by nearly 7 per cent on Monday and trading was halted for the day.
Restrictions on large sales will allow regulators “to realize the orderly withdrawal of temporary measures for the extraordinary volatility of the market,” said the CSRC statement dated Tuesday.
The market benchmark more than doubled between late 2014 and its June 12 peak as millions of novice investors bought shares.
The collapse in prices triggered a panicked response by Beijing, which banned large sales, cut interest rates, cancelled initial public stock offerings and ordered state companies to buy shares.
Chinese leaders had encouraged the public to buy in hopes of raising money to overhaul state industry. The market rout alienated small investors who were left holding shares worth less than they paid.
Authorities say shares bought by state companies will be transferred to China’s sovereign wealth fund to avoid depressing prices by selling them in the open market. The ban on new IPOs was lifted in November.