Like clockwork, China’s state-run media outlets are working overtime in an attempt to underpin the nation’s increasingly shaky stock market.
Overnight Xinhua reported that two major Chinese state-owned enterprises – oil refiner Sinopec and coal miner Shenhua Energy – had purchased stock in their firms in response to a government request.
Sinopec Group bought 46 million of its Shanghai-listed shares on Wednesday, or 0.04% of its 121 billion shares, bringing its total holdings in its subsidiary to 71.3% according to Xinhua. The newspaper also stated that the company has promised to buy a maximum of 2% of shares, including Wednesday’s purchase, in the coming 12 months.
Following Sinopec’s lead, Shenhua energy bought 8.02 million shares listed in Shanghai, taking its holdings to 73.05%.
Separately China’s stock market regulator, the CSRC, banned selling from any “controlling shareholders” and anyone else with more than 5% of the stock outstanding in a company for the next six months. This also applies to directors, supervisors and senior management personnel according to the CSRC.
The basis for the blanket ban on selling? The market had become “irrational” according to the regulator. It’s worthwhile noting that up until early June many mainland markets had jumped more than 140% in less than 12 months.
We’ll have to see whether these measure will be able to address the slide in stocks today. If recent history is anything to go by, investors should not hold their breath.
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