Exclusive-Beijing bourse tells 'major shareholders' to refrain from selling, sources say

The sign of Beijing Stock Exchange is seen at its entrance during an organised media tour, in Beijing, China February 17, 2022. REUTERS/Florence Lo/File Photo

SHANGHAI/BEIJING (Reuters) -The Beijing Stock Exchange has de facto implemented a new policy that prevents major shareholders of companies listed on its bourse from selling stock, worried that such sales could douse a long-desired rally, three people familiar with the matter said.

The bourse, launched two years, ago was set up to help facilitate funding for innovative small companies, dubbed “little giants”, but had languished due to lack of investor interest.

But the market’s benchmark 50 Index has surged 46% this month on the back of recent measures by authorities. These include lowering the required amount of funds an investor must have in their stock account to invest, improving trading mechanisms and encouraging mutual funds to participate in the market.

A “major shareholder” is one with a stake of 5% or more and is required to make a public filing with the relevant stock exchange before selling shares, according to rules for China’s bourses.

The Beijing exchange has been rejecting those filings, said the people who were not authorised to speak to media and declined to be identified.

It was not immediately clear how long this new policy would remain in place, they added.

The Beijing exchange and the China Securities Regulatory Commission did not immediately reply to requests for comment.

The bourse said separately in a statement on Monday morning ahead of this Reuters article that it was closely monitoring trading to ensure normal market order.

The so-called window guidance – where directives are made orally without written documents – is aimed at protecting the rally, the sources said.

One noted that without the guidance, the share price surge “could prompt institutional shareholders to reduce their holdings which could knock the index down again.”

The Beijing bourse currently houses 232 listed companies with a combined market capitalisation of 366 billion yuan ($50 billion).

By comparison, the Shanghai bourse is home to 2,256 listed firms worth 47 trillion yuan in total, while almost 3,000 companies listed in Shenzhen have a total market capitalisation of 31.9 trillion yuan.

($1 = 7.2111 Chinese yuan)

(Reporting by Beijing and Shanghai newsrooms; Editing by Edwina Gibbs)