Chinese authorities are continuing to take action to stabilise the Chinese stock markets. Yesterday, the China Securities Regulatory Commission (CSRC) released an announcement which bans the sale by certain executives and shareholders with stakes in excess of 5 per cent of shares in companies listed on mainland Chinese stock exchanges.

An English translation is set out below:

CSRC Announcement [2015] No. 18

Announcement of the China Securities and Regulatory Commission (No. 18 [2015])

Recently, the stock markets have experienced irrational declines. In order to maintain the stability of the capital markets and to effectively safeguard the legitimate rights and interests of investors, it is announced as follows:

  •  For the period of six months commencing from today [8 July 2015], controlling shareholders and shareholders holding in excess of 5 per cent of the shares (major shareholders), and the directors, supervisors, and senior management of listed companies must not reduce their shareholdings in such companies through the secondary market.
  • Major shareholders, directors, supervisors, and senior management of listed companies that reduce their shareholdings in such companies in breach of the above regulation will be dealt with severely by the CSRC.
  • Specific measures will be separately formulated on the methods in which the major shareholders, directors, supervisors, and senior management of listed companies will be able, in six months from now [8 July 2015], to reduce their shareholdings in such companies.

CSRC

(This translation has been produced by Macfarlanes for information only and may not be relied upon by any recipient of this circular.)

This is a somewhat blunt statement and it is not yet clear how this will impact on market participants, including the effects it may have on the operation of the QFII and Stock Connect market access products. In particular, given the impact on local Chinese depositaries and custodians, market participants are likely to interpret this statement conservatively pending further details from the CSRC.