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China regulator affiliate encourages share purchases by major shareholders

Chinese stocks fell nearly 10 percent last week, the worst weekly performance in two years as investors dumped shares across the board

Reuters 

Yuan

An affiliate of China’s securities regulator on Monday encouraged major of domestically-listed firms to increase their holdings, after Chinese stocks were mauled in a global sell-off last week. The call represents the clearest signal yet from the Chinese government to lend support to a market rocked by recent global volatility, China’s deleveraging campaign and fears of margin calls.

It also stirs memories of government intervention during China’s 2015 stock market crash, when companies were also urged to buy shares and state-backed funds were pumped into the market. Investor Services Center, directly managed by the Regulatory Commission (CSRC), said in an emailed statement that share purchases by major could help stabilize the market and shows big stick with retail “through thick and thin”. Such a practice would “bring confidence to small investors, and have a positive impact” on the market, the center said, encouraging major and senior executives of listed companies to increase shares if they have not yet done so. Chinese stocks fell nearly 10 percent last week, the worst weekly performance in two years as dumped shares across the board. In the past week alone, major or senior executives of more than 100 listed companies already increased holdings, while 75 companies announced plans to do so, said the center, whose include China’s stock exchanges. It was not clear if last week’s share purchases were the result of government intervention, but the center said on Monday it “recognizes, encourages and supports such a behavior.” “Investor protection is not only the responsibility of securities regulators, but also an important task for listed companies,” the center said in the statement. The move would help stem the stock market slide, and prevent irrational behaviors by small shareholders, it said.

First Published: Mon, February 12 2018. 20:39 IST
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