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In an effort to stabilize the country's stock markets, the China Securities Regulatory Commission (CSRC) has announced the suspension of lending restricted shares, effective from Monday. This move comes after recent sharp falls in the market and is part of a series of supportive policies implemented by Beijing.
Restricted shares, which are subject to limits on sale, are often offered to company employees or certain investors. However, they can be lent for trading purposes, putting additional pressure on markets during a downward trend.
The CSRC's decision aims to promote fairness and reasonableness, reduce the efficiency of securities lending, and level the playing field for investors. The regulator also intends to crack down on illegal activities that exploit securities lending to reduce holdings and cash out.
To further regulate the market, the CSRC will also limit the efficiency of securities lending in the securities refinancing market starting March 18.
Although the blue-chip CSI300 Index has seen some recovery, China's stock market continues to struggle. As a result, small Chinese investors are seeking alternatives to the domestic economy, driving up premiums on global index funds.
China's economy grew slightly above the government's target in 2023, but the recovery has been inconsistent. December data revealed weak consumption and a significant decline in home prices, indicating a deep crisis in the property market.
To align with the CSRC's measures, both the Shanghai and Shenzhen stock exchanges will suspend securities lending by strategic investors during lockup periods starting January 29.
