The China Securities Regulatory Commission (CSRC) reports it has reinforced its supervision of securities lending and fully suspended lending of restricted stocks. The move came the same day that Hong Kong-listed Chinese property company Evergrande was ordered into liquidation, and had its share trading suspended, by the High Court of Hong Kong.
The CSRC says it has ‘optimised’ the securities lending mechanism with a complete suspension of the lending of restricted stocks as of 29 January; and the market-based application for securities refinancing will be adjusted from real-time availability to next-day availability, limiting the efficiency of securities lending, as of 18 March 2024.
In October 2023, the China Securities Regulatory Commission cancelled lending activity by listed company executives and core employees by participating in strategic placements, and restricted the lending methods of other strategic investors in the early stage of listing.
Since the implementation of the new regulations, the regulator reports that loan balances dropped by nearly 40%, “achieving good results”.
On the basis of this experience, and following the idea of “steady advancement and step-by-step implementation”, the China Securities Regulatory Commission says it optimised securities lending this time, reflecting specific regulatory intentions.
Firstly, by highlighting fairness and reasonableness, and reducing the efficiency of securities lending, restricting 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 second is to highlight strict supervision, restrict the lending of all restricted stocks in stages, further strengthen the supervision of securities lending of restricted stocks, and at the same time, resolutely cracking down on illegal activities that use securities lending to reduce holdings and cash out.
In the next step, the China Securities Regulatory Commission says it will continue to strengthen supervision, put the fairness of the system in a more prominent position, promptly summarise and evaluate the effects, maintain market order in accordance with the law, and effectively protect the legitimate rights and interests of investors.
©Markets Media Europe 2024
