Almost all the stocks listed on the Shanghai and Shenzhen exchanges will be
traded normally today despite rules on suspension of shares which witness wild
fluctuations - a move analysts say could prevent panic selling.
Only a few shares in Shanghai and two in Shenzhen will be suspended for an
hour at the beginning of trading, the two bourses announced yesterday.
According to current rules, trading in a stock that has fluctuated by more
than a cumulative 20 percent on three successive days has to be suspended for
one hour and the company needs to issue a statement to clarify the "abnormal
If the rule were enforced, trading in hundreds of stocks on the Shanghai and
Shenzhen exchanges would have been suspended.
bourses have the right to waive the rules in exceptional situations.
The Shanghai Stock Exchange said yesterday that trading will be allowed in
264 stocks whose companies had made a statement by Saturday explaining the
This means that trading will be suspended in only a handful of companies
which had not made the statement.
The Shenzhen bourse said 46 shares which met the original suspension criteria
would be traded and only two would be suspended for an hour.
The stock market saw a big correction since last Wednesday after the
government raised stamp tax from 0.1 percent to 0.3 percent. The Shanghai
Composite Index dropped 7.7 percent by Friday, while the Shenzhen Composite
Index fell 12.7 percent.
"The Shanghai Stock Exchange adjusted the rule to ensure normal trading, and
offset some of the negative impact triggered by panic selling," said Chen
Weiran, an analyst at Guotai Junan Securities.
Many investors attribute their losses to the raised stamp tax but the move is
actually conducive to a healthy market, said Li Yining, a senior economist with
"Excessively high turnover (in the domestic market) is detrimental to a
healthy market," he said over the weekend.
"Regulators have a lot of cards to play," Yin Zhongli, an economist with the
Chinese Academy of Social Sciences, told China Daily.
Besides raising the interest rate and banks' required reserve ratio,
regulators can strengthen investigation into insider trading and price rigging
to cool speculation, said Yin.
"The government has the responsibility to clean up the market to ensure
(China Daily 06/04/2007 page1)