Templeton Emerging Markets Group calls it an act of “desperation.” UBS Wealth Management labels it “extreme.” And Wells Fargo Funds Management says it just “postpones the inevitable.”
China’s decision to ban major stockholders from selling stakes in listed companies has drawn skepticism from foreign investors. The money managers, with combined assets of almost $4 trillion, say the latest step to stem the country’s equity rout is just another measure to meddle in the market and won’t be enough to restore investors’ confidence.
“It suggests desperation,” Mark Mobius, chairman of Templeton Emerging Markets Group, said by phone. “It actually creates more fear because it shows that they’ve lost control.”
The China Securities Regulatory Commission said Wednesday that investors with holdings exceeding 5%, as well as corporate executives and directors, are prohibited from selling stakes for six months. The rule is intended to stabilize capital markets amid an “unreasonable plunge” in share prices, the CSRC said.
While China already has ordered government-owned institutions to maintain or increase stock holdings, the CSRC directive expands the sales ban to non-state companies and, potentially, foreign investors that own major stakes in mainland businesses.
In a sign that foreign investors expect more losses, the biggest U.S. exchange-traded fund tracking mainland stocks tumbled a record 11% in New York. Deutsche X-trackers Harvest CSI 300 China A-Shares ETF has declined 23% over the past week. The Shanghai Composite index jumped 5.8% at the close on Thursday, capping its biggest gain since 2009 as the government battled to restore investor confidence.
A 32% slump in the benchmark gauge has helped wipe out $3.6 trillion of market value in Chinese stocks since June 12 and prompted regulators to introduce support measures almost every night for more than a week. Other steps have included a suspension of initial public offerings and restrictions on bearish bets via stock-index futures. Policymakers have also made loans available to securities firms to buy shares.
In perhaps the most dramatic effort to stop the selloff, local exchanges have allowed more than 1,300 companies to halt trading in their shares.
