Shanghai, Shenzhen stock markets tighten rules on share trade suspension ahead of MSCI review

China’s two bourses are to implement tougher restrictions on voluntary trading suspensions, the policy change coinciding with the annual review by index compiler MSCI on whether to include mainland shares into its widely-tracked emerging markets index.

Chinese authorities have been pushing for the inclusion, as they see it as a platform to elevate China’s status in global stock markets, and as a channel to broaden the use of the yuan.

The Shenzhen and Shanghai stock exchanges both announced regulatory changes that will limit share trading suspensions to a maximum of three months for companies involved in major asset restructuring, and to one month for companies conducting private placements.

“Companies that want to apply for trading suspension longer than three months should hold a board meeting to decide the arrangement. Professional opinion is required from sponsors and financial advisories if the company apply for long term trading suspension,” the guideline issued by the Shenzhen Stock Exchange said.

Both bourses said the new rules are meant to curb stock suspensions at will and are designed to protect the interests of investors.

MSCI will announce its decision on June 15 on whether or not to include mainland shares into its Emerging Market Index, tracked by about US$1.5 trillion of assets worldwide now. An inclusion will require passive index-tracking funds to buy the shares.