Beijing Implements Strict Trading Ban on Institutional Investors to Curb Market Declines

China is implementing what could be its most aggressive restriction yet in its struggle to keep its $8.6 trillion stock market afloat. Major institutional investors are now prohibited from selling stocks at the opening and closing of the trading day. 

This directive, issued by the China Securities Regulatory Commission (CSRC) under the leadership of its new Chairman, Wu Qing, targets major asset managers and proprietary trading desks of brokerages. 

This measure is part of a broader crackdown on bearish market bets, including heightened surveillance on short selling, with a task force set up in collaboration with national stock exchanges to monitor and warn firms profiting from these activities.

The specifics of the ban’s application across the financial sector remain uncertain, and it seemingly does not extend to individual investors. However, as Bloomberg reports, the ban effectively sidelines key market players during two of the most pivotal moments — the first and last 30 minutes — in a trading day. This could amplify the influence of state-backed funds on market outcomes, particularly regarding the benchmark index’s closing levels.

The market showed signs of recovery with the CSI 300 Index rising 1.4% on Wednesday, but it has a long way to go with figures still down about 17% year over year.

Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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