China Bourses Set to Reduce Trading Halts to Curb Abuses

(Bloomberg) -- China is seeking to reduce the period of time public companies can suspend their shares, addressing a key concern about its stock market among international investors.

Trading halts for corporate restructurings will be limited to 10 days, according to proposals from the Shanghai and Shenzhen stock exchanges published late Wednesday, a change from the three-month limit allowable for major restructuring.

Stock suspensions in China have been a concern for investors who can be left stranded with positions for months and unable to sell. Nearly half the stock market was suspended at one point during the 2015 crash, triggering rebukes from MSCI Inc., among others. Index compilers including MSCI made rule changes a condition for including Chinese stocks in their global benchmarks, to reduce the risk that investors will be unable to trade when they want to.

Compared to developed markets, trading halts in China are still too frequent and too long, the China Securities Regulatory Commission said on Nov. 6, when it announced plans to amend the regulations.

Other proposed changes:

  • Companies can apply to extend the 10-day limit to 25 days if extra time is needed to disclose more information
  • Different time limits apply if a restructuring is related to “key state projects,” including defense and other “confidential” cases
  • Trading halts for most matters, such as changes of ownership and stock incentive plans, should not last longer than two days, though a further three-day extension may be granted

The proposals from the Shanghai Stock Exchange is open for comment until Dec. 1, and the Shenzhen Stock Exchange is seeking feedback until Dec. 21.

©2018 Bloomberg L.P.