China Makes Selling For Big Investors Illegal

Tyler Durden's picture

With another bloody session in the books for China’s bursting equity bubble, it’s now abundantly clear that Beijing and the PBoC have lost control not only of the market but of the narrative as well, despite dozens of attempts to steer both in the “right direction.” 

Having corralled selling by the National Social Security fund earlier this week and after discouraging local reporters from mentioning selling in the press, China has now made it illegal for big investors to dump shares over the next six months. Here are the details via Bloomberg: 

China’s securities regulator banned major shareholders, corporate executives and directors from selling any of their stakes for six months, the latest effort to stop a $3.5 trillion rout in the nation’s equity market.

 

Controlling shareholders and investors holding more than a 5 percent stake in a company will be prevented from cutting their holdings over that time period, the China Securities Regulatory Commission said in a statement.

And here’s the official word from the CSCR (Google translated):

Recently, the stock market fell irrational, for the maintenance of the capital market, and earnestly safeguard the legitimate rights and interests of investors, is now on the relevant matters are announced as follows: First, from now on within six months, the controlling shareholders of listed companies and shareholders holding more than 5% (hereinafter, saying large shareholders) and its directors, supervisors and senior management personnel shall not reduce shares held by the secondary market. Second, the major shareholders of listed companies and the directors, supervisors and senior management personnel who fails to reduce shareholdings in the Company, the China Securities Regulatory Commission will be given serious treatment. Third, the major shareholders of listed companies and the directors, supervisors and senior management personnel in the six months after the reduction of shares from shareholders with specific measures, separately.

Yes, the stock market "fell irrational" lately. And by "irrational" the CSCR apparently means that temperament that tends to fall over people once they realize they've helped to faciliate a completely "irrational", debt-fueled mania that's sent valuations on many listings into the stratosphere and lured in millions of farmers and hairdressers who are now collectively leveraged to gills. 

In any event, this, like every other move in China's rapidly expanding plunge protection playbook, will fail miserably, meaning Beijing with ultimately be left with no choice but to "halt" whatever shares are still trading by the end of the week. 

We can now add one more desperation measure to the annotated history of Chinese market intervention:

 

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fxpmtrader's picture

Now if that is not a reason to finally wake up - then nothing will be it anymore.

So much for "fair" markets.

Only idiots and dumb sheeple are still in this casino.

Tom Servo's picture

Guess China is sick of you guys dumping on them.... and they DDOS'd you?

 

Oh regional Indian's picture

Perfect, blame China, just as predicted.....

But even now it is not yet time.....so imagine what is coming.

Frigging roller coaster to the top peering over the bottomless edge....

https://aadivaahan.wordpress.com/2013/05/28/are-you-seeking-polishing-re...

tc06rtw's picture

NOW THIS IS REAL STUPID !!
 
      IF EVERYONE WOULD  BTFD,  EVERYBODY WOULD GET WEALTHY !!

Publicus's picture

We have much to learn from China.

 

We should do the same here.

usednabused's picture

Didn't Dick Fuld do the same thing here? Well, he did threaten to burn the shorters arms back to their fucking elbows. And I'd say they've pretty much done that. So whats all this squealing about China for? They weren't the first to pull this shit. But they have proven they are as corrupt as the den of thieves in DC and NY

mtl4's picture

China likes free markets just as much as the west does........as long as they are only going up, otherwise it's back to communism to keep it all kosher.

FireBrander's picture

"so much for" reserve currency status...really folks, even if the currency is backed by gold, do you trust the Chinese government with your wealth?

When shit hits the fan, do you TRUST the Chinese government to convert your wealth to physical gold upon your demand...lol...NO FUCKING WAY....they won't even let you sell stock you own...China is NO WAY NEAR "reserve status" even if it's 100% backed by gold...NO FUCKEN WAY.

silverer's picture

Exactly.  I thought, "so much for letting the market work".  Then I realized that when they do this, it's not a market anymore.

SofaPapa's picture

There are no global scale markets anymore, anywhere.  They are allowed to operate as long as the manipulation can keep them moving up.  If there is any hint of "irrationality" (read: actual human emotion and reaction to insanity), then the market is "broken" or - in China's case - banned.

Today's financial world.  Surprising we keep watching, when we know that what we are watching is a myth.  Weird.

StychoKiller's picture

Recently, the stock market fell irrational,

It's just a "configuration issue," (i.e., Wi Tu Lo!)

silverer's picture

I think you struck a valid note.  It would have to be structured so the guarantee is that the gold is there.  But then again, I wouldn't expect problems with a gold backed currency.  But then again, we may never see free markets again anywhere on the planet.

ATM's picture

How is China any different than the US of A in that regard? 

El Vaquero's picture

It is doing this shit faster and it doesn't hold the WRC. 

Quus Ant's picture

Perhaps China is crashing because it was one of the few markets that still had an exit door?

 

Doors are closing.  Please Stay clear of the doors.

FireBrander's picture

China is 100% correct in it's moves; we all know that, sometimes, "You gotta suspend the Free Market in order to save it"....

Tall Tom's picture

Having "Technical Difficulties" that stops trading on the NYSE helps out in a crunch....er...CRASH.

 

Hardly wait for the 500 point Down Day. (Maybe we can actually beat that 777 record?)

stocktivity's picture

"

Recently, the stock market fell irrational"

When it was going up irrational, nobody complained.

Ghost Writer's picture

Yes but some perspective courtesy the The Economist.

"CHINA is certainly not the first country to try to prop up a falling stockmarket. The central banks of America, Europe and Japan have all shown form in buying shares after crashes and cutting interest rates to cheer up bloodied investors. But the circumstances and the manner of China’s intervention of the past ten days make it an outlier, worryingly so.

The trigger in China’s case is perplexing. Yes, the stockmarket is down a third over the past month, but that has simply taken it back to March levels; it is still up 80% over the last year. Growth, though slowing, has stabilised recently. Other asset markets are performing well. Property, long in the doldrums, is turning up. Money-market rates are low and steady, suggesting calm in the banking sector. The anticipated correction of over-valued stocks hardly seems cause for much anguish.

Lost in all the drama about the stockmarket is that it still plays a surprisingly small role in China. The free-float value of Chinese markets—the amount available for trading—is just about a third of GDP, compared with more than 100% in developed economies. Less than 15% of household financial assets are invested in the stockmarket: which is why soaring shares did little to boost consumption and crashing prices will do little to hurt it. Many stocks were bought on debt, and the unwinding of these loans helps explain why the government has been unable to stop the rout. But this financing is not a systemic risk; it is just about 1.5% of total assets in the banking system.

If economic stability is not in peril, why then the panic? The most compelling explanation is politics. The government has staked much credibility and prestige on the stockmarket. When the going was still good, the official press was chock-a-block with articles about how the rally reflected the economic reforms that Xi Jinping, China’s top leader, was set to push. Li Keqiang, the premier, said repeatedly that he wanted equity markets to provide a bigger share of corporate financing—comments, from punters' perspective, not unlike waving a red cape in front of a bull. The sudden end to the rally is the first major dent in the public standing of the Xi-Li team. The botched attempts to stabilise the market only make them look weaker, giving succour to their critics."

usednabused's picture

Fuck that rag. If you're reading the economist, you must enjoy a good dumbing down, huh?

Dr. Engali's picture

Now they're getting the idea. See, just watch what the mighty U.S.S.A does and we can learn you a thing or too.

NoDebt's picture

Woah, Doc, I feel like I just time-warped forward about 2 hours.  And I wasn't even drinking this time.

I guess we're back up finally.

Dr. Engali's picture

Yeah, no shit. I was getting a bit twitchy there.

kliguy38's picture

YUP......gotta make sure the market is uni-directional....after all ya can't have losses!! That would be un-Amerikan

Antifaschistische's picture

I think they should just set a fixed price for all publically traded stock.  

Force companies to maintain a fixed quantity of shares issued.  

Force any buy/sells to trade at the fixed levels with minimal spreads.

Any price movement to the fixed price must seek Beijing approval first.

SofaPapa's picture

I know you know this, but this would be the case for all markets: Beijing, London, New York, Brussels, etc...

I think you're on to something.  Sounds like an idea so good they won't be able to resist it.

Ms. Erable's picture

More proof that coercion is necessary for the proper operation of free markets.

FireBrander's picture

Capitalist Profits; Socialized losses.

A few will walk with billions in profit from this market runup...while billions of Chinese suffer the crash.

ebworthen's picture

All of this is no different than being a slave on a plantation.

Pick the cotton and you get a shack and some gruel.

There is no money, only day to day survival.

Killing people with debt, not guns.

Unless they get out of line.

Fukushima Fricassee's picture
Fukushima Fricassee (not verified) Jul 8, 2015 9:09 AM

Fucked up

EscapeKey's picture

worked so well for lehman cros... for a few days.

then the collapse resumed.

FireBrander's picture

Pretty clear "5 waves up" with a vertical 5th wave blowoff in the Chinese market..this is just the first of "3 waves down"..I expect a solid rally at some point...then another massive selloff. After that? Will they go the US 2009 route or the Japan 1990 route...we'll have to wait and see.

JustObserving's picture

Zero Hedge is up.  Will miracles never cease in the land of the free?

 

 

Big Corked Boots's picture

I was starting to get the DT's there.

ImReady's picture

I figured .gov pulled the plug. It WILL happen someday...

NoDebt's picture

I blame North Korea.  Or Russia.  Maybe China.

Wile-E-Coyote's picture

My money is on China......they don't like this shit, telling it how it is...................... beware the yellow peril.

SofaPapa's picture

I was thinking to myself about what I would do if today was the one...

SeattleBruce's picture

Right - it's important to get out from behind the keyboard, and find ZH allies locally - so that when that happens, we won't be alone.

tarsubil's picture

Seems reasonable.

CHC's picture
CHC (not verified) Jul 8, 2015 10:58 AM

HaHaHa...stupid Chinaman.  Old Confuscius saying:  Where there will, there is way. 

22winmag's picture

That's a long time to hold a big dump!

 

Perhaps on the side of the road would be the appropriate location for said dump. After all, this is China.

Budnacho's picture

T-Minus 6 months for implosion....

Shizzmoney's picture

This will end well

I hope the financial world burns.  It's about time.

yogibear's picture

LOL, sure the stock market isn't in a bubble...

It's what happens when bubble gets big. They burst.

 

terry44's picture

That will just stop big investors going back in. How stupid.