China share rout hits global markets By Nick Beams

Chinese financial authorities have banned major shareholders, corporate executives and directors from selling their shares in listed companies for a period of six months. The ban is the latest in a series of increasingly desperate moves to try to halt the crash of the Chinese stock market, amid indications it is beginning to impact on the rest of the world.

Under the new regulations, investors holding more than 5 percent in a company have to keep their shares, while the ban on sales by executives and board members applies regardless of the size of their holdings.

The move was announced in the wake of a further decline in share prices yesterday, which saw the key Shanghai Composite Index close down by 5.9 percent, after losing as much as 8 percent during the course of the day. The Shenzhen index also lost 2.5 percent. For more than a week, the government and financial authorities have unveiled a series of measures to try to boost markets, but all have failed.

Concerns are now being expressed that government intervention may actually be making the situation worse. Mark Mobius, the chairman of the Templeton Emerging Markets Group, told the Sydney Morning Herald that the continuing intervention “suggests desperation. It actually creates more fear because it shows that they’ve lost … control.”

Yesterday it was revealed that almost 1,500 stocks, comprising 50 percent of all listed companies, have suspended trading, freezing equity worth around $2.6 trillion. But even this figure is an underestimation of the market seizure. Under Chinese stock market regulations, a stock ceases trading once its price drops more than 10 percent. According to one estimate, some 90 percent of stocks have either been suspended or are hitting their daily limit.

Overall, more than $3 trillion in market capitalisation has been wiped out and the markets are down more than 30 percent from their peak a month ago. The amount of money that has disappeared is more than the market capitalisation of the French and Spanish markets combined, and almost equivalent to the gross domestic product of Germany, the world’s fourth largest economy.

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