Chinese regulator intensifies crackdown on insider trading

Seeking to "purify" China's capital market environment, the country's securities regulator today warned of harsher punishment for insider trading, days after over 20 million small investors fled following the stock market mayhem that wiped about USD 3.2 trillion of capital.
China Securities Regulatory Commission (CSRC) in a statement said that punishment on insider trading will become more harsh in order to "purify" the capital market environment.
More efforts will be made to clamp down on the leaking and prying of non-public information involved in securities trading, it added.
The commission has busted 20 cases of insider trading this year and penalised one institution and 31 individuals, state-run Xinhua news agency reported.

The warning to deliver harsh punishments were aimed at reviving the market sentiment as over 20 million small investors, nearly one-third of Chinese stock market fled the turbulent market after the USD 3.2 trillion crash, which drove many of them bankrupt.
The number of small investors holding stocks in their accounts slid to 51 million at the end of July from 75 million in June, China Securities Depository & Clearing Corp, the government agency that tracks accounts said.

Shanghai Composite Index plunged 14 per cent, a record single month drop in six years.
Unlike institutional investors dominated US stock market, small and individual investors are major players in Chinese stock market, state-run China Daily reported.

According to data from China International Capital Corp, small investors hold about 80 per cent of outstanding shares of public companies.
China has pressed in police to investigate massive stock market crash wiping about USD 3.2 trillion of capital. Official media put the losses around USD 1.1 trillion.
Since the start of market plunge after it hit peak in mid June, government rolled out series of easing policies and measurement, but the results have had limited impact.
Despite stocks becoming cheaper due to market plunge, fewer people are entering the market. Compared to June, 20 per cent fewer new accounts were created in July, the report said.

Bank deposit is still the favourite investment tool for Chinese families. Up to 50 per cent of disposable income will end up in families' saving account, according to data from World Bank.
Due to recent volatility, it is unlikely that many families will move their money from saving account to stock market.