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(THE STRAITS TIMES)Chinese regulators leapt to support stock markets on Tuesday (Jan 5), the day after a major crash, with the central bank pouring cash into the money market system and the securities regulator suggesting it might restrict share sales by major shareholders.
The unexpected 130 billion yuan (S$28.37 billion) injection by the central bank during open market operations - the largest such injection since September - appeared timed to reassure Chinese retail investors, who are always sensitive to liquidity signals, that the bank would support the market with cash.
The China Securities Regulatory Commission (CSRC) said it is studying rules to regulate share sales by major shareholders and senior executives in listed companies.
This would indirectly address concerns that the end of a 6-month lockup on share sales by major institutional investors next Monday - would result in a massive institutional evacuation from stocks.
But CSRC spokesman Deng Ge said the expiry of the lockup on Jan 8 will have a limited impact on the market and dismissed as a "market rumor" that more than one trillion yuan of stocks will become available for sale.
"Although the value of major holders' free-floating stock is not small, not all of them need to reduce their holdings," he said.
The lockup, imposed during last year's US$5 trillion stock- market meltdown, barred major shareholders from selling their investments for six months and drew criticism at the time from foreign investors including Templeton Emerging Markets Group and UBS Wealth Management, who saw the intervention as a step too far.
China's regulator also defended the functioning of the new "circuit breaker" policy that caused Chinese stock markets to suspend trade on Monday after markets fell 7 per cent, triggering the mechanism on the very first day it came into effect.
While some analysts criticised the design of the circuit breaker, saying it inadvertently encouraged bearish sentiment, the CSRC said the mechanism had helped calm markets and protect investors - although it said the mechanism needs to be further improved.
The measures appeared to have had some effect by mid-morning. While major indexes opened more than 2.5 per cent lower, they quickly recovered into positive territory.
The CSI 300 Index was little changed at 10:05 am local time after rising as much as 1.4 per cent and dropping 2.7 per cent.
The Shanghai Composite Index slid 0.3 per cent, while the Hang Seng China Enterprises Index added 0.1 per cent after falling the most since August on Monday.
The world's second-largest stock market began the year on a down note after data showed manufacturing contracted for a fifth straight month and investors speculated that the end of the ban on share sales by major stakeholders may come as soon as this week.
