China slaps a selling ban on investors to halt market slide

China’s stock market regulators have banned big investors from selling shares in their latest attempt to halt the plunge in the country’s markets.

Shareholders with stakes of more than 5 per cent in any company have been told they cannot sell for the next six months, and the authorities said they would deal severely with those who broke the rules.

The ban also applies to foreign investors, even though most of their holdings are lower than 5 per cent.

China’s stock markets opened down again on Thursday, before the Shanghai Composite eventually rallied, ending up nearly 6 per cent. The index fell by as much as 8.2 per cent the day before, leading some analysts to dub the session “Black Wednesday”. But Qian Liu from the Economist Intelligence Unit said: “It’s not a crisis, more an adjustment.”

Meanwhile, the state-run news agency Xinhua said police were investigating “vicious short-selling” on the country’s stock market and promised to crack down on operations that had broken trading regulations.

In another attempt to stem the slide in the markets, Beijing has relaxed lending rules – making it easier for people to borrow money for investment – in the hope that they will buy more stocks.

In sharp contrast with other big stock markets, retail investors account for around 85 per cent of China trading

Chinese shares have lost more than 30 per cent of their value since the middle of June and investors are worried that the market turmoil in the country could destabilise the global economy. Since the beginning of the week, around 1,300 Chinese companies – half the stock market – have voluntarily suspended trading in their stocks.

The falls have prompted Beijing to orchestrate brokerages and fund managers to promise to buy billions of dollars worth of stocks, helped by a state-backed margin-finance company that the central bank has pledged will provide sufficient liquidity.

The China Securities Finance Corporation (CSFC) said it would do this through measures including inter-bank lending, mortgage financing and floating financial bonds. The CSFC also said it would purchase more shares in small and medium-sized listed companies, which have suffered the biggest losses.

The yen rose to a seven-week high against the dollar as investors sought safe-haven assets.