New measures by China’s securities regulator that ban major stockholders from selling stakes in listed companies are a sign of desperation and create fear among investors, said Mark Mobius, executive chairman of the Templeton Emerging Markets Group.
Investors with holdings exceeding 5 percent as well as corporate executives and directors are prohibited from selling stakes for six months, the China Securities Regulatory Commission said in a statement Wednesday. Regulators have unveiled measures almost nightly over the past 10 days seeking to stabilize the country’s stock market, steps that have so far failed to revive investor confidence.
“It suggests desperation,” Mobius said by phone on Wednesday. “It actually creates more fear because it shows that they’ve lost the control. Unfortunately, now people probably begin to think that there’s no floor.”
The measures come amid a 32 percent plunge in the Shanghai Composite Index from this year’s June 12 peak that’s helped erase more than $3.5 trillion in value. Foreign traders sold Chinese shares at a record pace this week in part due concerns over the government’s meddling in markets.
The rule is intended to guard capital-market stability amid an “unreasonable plunge” in share prices, the CSRC said.
It would be better to allow the market to move at this own pace and to make the adjustment, according to Mobius.
“When we have market forces move in one direction, it’s very difficult to control them. It’s true in China, and also true in the U.S.,” he said.