New | The CSRC poised to extend restrictions on stock sales by major shareholders

China’s securities regulator is likely to make it harder for major shareholders to sell stocks on the secondary market, as the authority seeks to avoid another punishing sell-off following the sharp declines Monday which triggered a circuit-breaker trading suspension.

The China Securities Regulatory Commission (CSRC), watchdog of the nation’s equity market, is studying rules “to regulate share sales by major shareholders and senior executives in listed companies”, it said in a Q&A published Tuesday morning on its official website.

“The CSRC is studying issuing pre-announcement rules for the major sales of shares during the pre-opening sessions by the above group, and restricting the proportion of shares that they could sell during a given period of time.”

The authority also said it “is open to revising the circuit breaker rules if needed.” The mechanism, introduced by the CSRC to strengthen market stability, brought trading to a halt in the afternoon session on Monday.

This Friday marks the end of a six-month ban on share sales by major shareholders and senior executives which was imposed by the CSRC on July 8 to help stabilise mainland China equity markets that had lost nearly a third of their value in three weeks.

“It seems the CSRC is likely to extend the ban, or introduce other mechanisms to reduce a big sell-off by major shareholders, particulary under the current situation when markets are so volatile,” an unnamed senior analyst with a Shanghai based state-owned brokerage said.

Investors have been fearing a barrage of selling by major stakeholders when the ban is lifted, the broker said, adding that some of the concerns are slightly exaggerated.