Shareholders Sell Fewer Shares as Stricter Dumping Rules Kick In

(Beijing) — Shares offloaded by major shareholders of Chinese-listed companies dropped significantly in June after stricter rules limiting such sales took effect in late May.

In June, share sales by the 10 largest shareholders of all onshore-listed companies fell 63% from May, and were down 78% from June 2016, according to calculations by Caixin.

In response to the 2015 stock market rout in which tens of trillions of yuan were wiped from China’s two major exchanges, the China Securities Regulatory Commission (CSRC) in January 2016 issued formal restrictions on share dumping. Shareholders holding more than 5% of a company’s outstanding shares, as well as directors and senior management, were barred from selling more than 1% of a company’s total shares within any three-month period.

In late May this year, the CSRC expanded the rules to include new limits on share sale through block trades and private placements — popular ways to sell shares in bulk. The new rules also cover investors who own shares before the stock starts trading, commonly called pre-IPO shares.

The new measures, alongside tougher enforcement, appear to have closed major loopholes, as June was the first month in 2017 when the total volume of share sales by major shareholders dipped below 10 billion yuan ($1.47 billion).

During a June 30 news conference, CSRC spokesperson Deng Ge emphasized that the securities regulator will strictly enforce the new rules and address disruptive market behavior by “scraping the poison off the bone.”

Contact reporter Liu Xiao (liuxiao@caixin.com)