China’s securities regulator to cut the maximum duration that stocks can suspend their trading

  • Share halts in China have been a major issue for investors in recent years
  • Nearly half of all listed stocks had their trading halted during the 2015 market rout
PUBLISHED : Wednesday, 07 November, 2018, 1:37pm
UPDATED : Wednesday, 07 November, 2018, 1:37pm

Chinese authorities said they will reduce the amount of time stocks can stay suspended, addressing a long-standing concern that investors can be left stranded for months, unable to sell.

The China Securities Regulatory Commission (CSRC) made the announcement on its website late Tuesday. Under existing rules, companies can suspend their shares for as long as three months for “major asset restructuring,” which can involve little more than shuffling assets from one unit to another.

Share halts in China have been a major issue for investors in recent years. Nearly half of the stock market was suspended at one point during the 2015 crash, triggering rebukes from MSCI and many international investors. Index compilers including MSCI made changes to suspension rules a condition for including Chinese stocks in their global benchmarks, to reduce the risk that investors will be unable to trade when they want.

Compared to internationally mature markets, trading halts in China are still too frequent and too long, the CSRC said. It did not say what the new maximum halt length will be, nor when the new rules will be introduced, though it did say that shares should not be suspended during a company’s bankruptcy restructuring period.

While Chinese companies have been known to halt trading to buy time with creditors, such suspensions have been rare during the latest sell-off.

Halted stocks amounted to about 2 per cent of the nation’s public companies on Wednesday, compared with 6 per cent at the end of last year.

Stocks suspended 50 days or more are rejected or dumped from benchmarks under index providers’ rules. ZTE and China Hainan Rubber Industry Group were among five suspended stocks excluded from the MSCI China Index in May.