curbs on the inflow of shares into the stock market in a bid to boost
market sentiment.
The new rules, published by the China Securities Regulatory
Commission, target previously non-tradable shares of listed companies
that are gradually becoming tradable as a result of sweeping reforms
introduced in mid-2005.
Under the 2005 reforms, companies are not allowed to sell their shares
immediately, but must wait until the end of a so-called "lock-up"
periods.
However, as the lock-up periods end for a large number of companies,
they often release the newly tradable shares onto the market in
massive quantities.
This threatens to "put constant pressure on stock prices and distort
the price formation mechanism," the commission said in a statement.
To counteract this, the new rules order investors to use a special
trading system if they want to sell previously non-tradable shares
making up more than one percent of the total share capital of a listed
firm within a single month.
The trading system, known as "block trading," takes places after
normal trading hours and therefore does not impact the main indices.
The rules, issued Sunday, were viewed by many traders as a positive
signal for the market, but analysts warned they were unlikely to
sustain a strong rebound without more supportive measures.
"Investor confidence has been severely hit by previous falls," said
Qiu Yanying, a Shanghai-based analyst with TX Investment Consulting.
"The rules are stabilising the market for the short term but it will
take more to restore the confidence and have some lasting effects."
The benchmark index ended up 0.72 percent at 3,116.98 Monday, well off
a high of 3305.17 hit in early trade.
Source : Economic Times
Get the freedom to save as many mails as you wish. Click here to know how.
No comments:
Post a Comment