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CSRC suspends restricted share lending

China stocks

A string of supportive policies by Beijing including a deep cut to bank reserves helped lift Chinese stocks off 5-year lows early last week but they pulled back again on Friday

China’s securities regulator said on Sunday that it will fully suspend the lending of restricted shares effective from Monday, in policymakers’ latest effort to stabilise the country’s stock markets after recent sharp declines.

A string of supportive policies by Beijing including a deep cut to bank reserves helped lift Chinese stocks off 5-year lows early last week but they pulled back again on Friday, suggesting deep investor pessimism over the outlook for markets and the shaky economy.

Analysts and investors say China needs to roll out more support measures to revive consumer and business confidence and get activity back on a more solid footing.

Restricted shares are often offered to firm employees or investors with certain limits on their sale, but they can be lent to others for trading purposes, like short-selling, which can add pressure on markets during an extended slump.

Sunday’s move will “highlight fairness and reasonableness, reduce the efficiency of securities lending, and restrict the advantages of institutions in the use of information and tools, giving all types of investors more time to digest market information and creating a fairer market order,” the China Securities Regulatory Commission (CSRC) said a statement published on its official WeChat account.

The regulator added that the move would “resolutely” clampdown on illegal activities that use securities lending to reduce holdings and cash out.

It also said it will limit the efficiency of some securities lending in the securities refinancing market from March 18.

Last October, the CSRC restricted securities lending businesses and tightened scrutiny of improper regulatory arbitrage by imposing higher margin requirements.

China’s stock market slipped in 2023 and has extended its decline in the new year. Though the blue-chip CSI300 Index has recovered some ground, it still down nearly 3% year-to-date.

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