The new regulatory rules will include selling restrictions, mechanisms and a predisclosure system to help decrease the negative impact on the capital market. (Photo : Reuters)
To prevent China's fragile stock market from collapsing, the China Securities Regulatory Commission (CSRC) has announced a new set of rules that will regulate share sales among major shareholders, China Daily reported.
The new regulatory rules will include selling restrictions, mechanisms and a predisclosure system to help decrease the negative impact on the capital market, said CSRC spokesman Deng Ge.
The securities regulator made the announcement on Tuesday, Jan. 5, just in time for the expiration of the imposed stock-selling ban on major shareholders.
The upcoming lifting of the ban was said to trigger the massive sell-off that occurred on Monday, Jan. 4, which triggered the halt of trading in equities, options and index futures.
Various media outlets speculate that the CSRC will also extend the current sale ban until the formal introduction and implementation of the new rules.
Officials from the regulatory commission have declined to comment.
Meanwhile, two listed companies contacted have not received any notice from the stock exchanges or the regulatory commission about the extension of the selling ban, according to China Daily.
On the other hand, five listed companies have already promised that their controlling shareholders and senior executives will not sell shares in order to reduce equity holdings.
Once the selling ban is lifted, overvalued small-cap stocks will take the blow, according to securities researcher Dong Dengxin from Wuhan University of Science and Technology.
"There is a strong motivation to sell the expensive small-cap stocks as the average price-to-earning ratio of companies listed on the startup board has reached 109 times," Dong said.
Investors are not too optimistic about the Chinese stock market in 2016. An online survey by Tencent Holdings Ltd. revealed on Tuesday that an overwhelming 61 percent out of 40,000 online investors shared a negative outlook for the A-share market, while only 22 percent of respondents were positive.
