China has urged controlling investors in listed companies to boost their holdings and some mutual funds to limit equity selling this week, according to people familiar with the matter, as officials seek to stem the impact of the stock selloff.
Over the weekend, the China Securities Regulatory Commission and other regulators sent informal directives to some major stockholders encouraging them to purchase more shares in the mainland-listed firms they invest in, according to the people, who asked not to be identified because the instructions were not made public. They called on some mutual funds to avoid being net
sellers of equities as well.
Brokerages were also asked to provide trading summaries from last week to the regulator, and trading plans and previews for this week, the people said. The CSRC didn’t immediately respond to a fax seeking comment on Monday.
As the global equity rout rocked markets last week, Chinese shares on the mainland plunged the most in two years, fueling speculation the government would step in to calm trading — as it has during past selloffs. Initially triggered by the slump in US shares, China’s retreat has been exacerbated by the looming Spring Festival holiday, which typically sees traders wanting to reduce holdings before the break. Beijing’s ongoing drive to reduce leverage in China has also added to downward pressure.
China has a track record of intervening to staunch losses in the mainland market, which — unlike Hong Kong — is dominated by individual investors. The practice has spurred concern over moral hazard, as it creates expectations during times of volatility that officials will come to the rescue.
While the informal directives were conveyed at the weekend, Bloomberg’s calculations show that more than 110 companies listed in Shanghai and Shenzhen issued statements related to major shareholders boosting their stakes between February 9 and February 12.
The Shanghai Stock Exchange said on Friday that it has issued warnings and limited intraday trading to prevent large equity sales that affected the market’s stability. Meanwhile, the China Securities Investment Services Center — a body serving smaller investors that’s managed by the CSRC — said major shareholders can boost investor confidence by purchasing stocks, Shanghai Securities News reported on Monday.
The Shanghai Composite Index rose 0.4 percent as of 1:39 p.m. local time on Monday, while the Shenzhen gauge added 2.4 percent.
Stock slump sparks online fury in China
Chinese investors flooded a social media account of the US embassy in Beijing with complaints about stock losses after the country’s equities suffered their steepest weekly plunge in two years.
A Sina Weibo account affiliated with the embassy received more than 10,000 comments before the embassy stopped allowing them, citing social media rules of the State Department. The online uproar followed the Shanghai Composite Index’s 9.6 percent tumble last week, the most since January 2016, amid a global selloff.
Some of the most popular comments contained expletives directed at Liu Shiyu, who took over as chairman of the China Securities Regulatory Commission in February 2016 in the wake of a $5 trillion rout and drove volatility to the lowest in decades. The securities regulator had prevented people from remarking on its own Weibo account last week, where many had also made personal attacks against Liu and demanded his ouster.
“Mr. Ambassador, is Liu Shiyu your undercover agent in the Chinese government? This guy succeeded in pushing hundreds of millions of Chinese investors to the opposite side of the Communist Party and government,” one anonymous user said.
The securities regulator had prevented people from remarking on its own Weibo account last week, where many had also made personal attacks against Liu and demanded his ouster. Some of those commenting on the embassy’s account blamed the U.S. for spurring the stock declines, while others criticized the CSRC for not intervening, saying they would have a bad time during the upcoming Chinese New Year holiday due to their losses.
The embassy and CSRC did not respond to requests for comment.
The comments quickly spread on Weibo, where the CSRC has nearly 5 million followers and the embassy has 1.3 million followers. Mainland investors also complained on the Weibo accounts of other diplomatic missions in Beijing, including the Japanese and British embassies.
Public criticism of senior officials is generally forbidden in China, and official media have published commentaries to ease concern about market losses. The party’s People’s Daily said on Thursday the Chinese stock market may fluctuate in the short term due to what’s happening on Wall Street, but the impact is not expected to continue in the medium term.