China Securities Regulatory Commission (CSRC) in Beijing Photo:VCG

China's top securities regulator on Sunday announced it will suspend lending of restricted stocks to strengthen the supervision of short-selling, a move that will take effect on Monday, in the latest measure to stabilize the stock market.

In addition, the China Securities Regulatory Commission (CSRC) said that it will limit the efficiency of some securities lending in the securities refinancing market from March 18.

Securities finance firms that borrow shares from institutional investors will need to wait one day before providing them to brokerages instead of the stock being immediately available. 

Observers said that the adjustments focus on responding to investors' concerns about the corresponding issues, and will improve the margin trading and short-selling mechanisms, which fully reflects an investor-centric approach.

The moves aim to create a fairer market order by restricting institutions from taking advantage of utilizing information and tools, and allowing investors to have sufficient time to process market information, read the statement. 

It added that the moves will focus on strict supervision by strengthening the oversight of securities financing for restricted shares, while resolutely cracking down on illegal and irregular behavior.

The adjustments will help boost the market's confidence as the supervision is implemented by prioritizing investors, Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Sunday. These measures will promote the stabilization and recovery of the capital market, Yang said.

The measures will also optimize the current mechanism. It is not fair if institutions have more ways to trade and more information to trade with than individual investors, who account for a relatively large proportion of the market, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University, told the Global Times on Sunday. 

Both the Shanghai and Shenzhen exchanges issued notices on Sunday to suspend the lending of allocated shares by strategic investors within the committed holding period. 

The CSRC will continue to strengthen supervision while further prioritizing the fairness of the system in a bid to maintain market order in accordance with the law, and effectively protect the legitimate rights and interests of investors, the agency said.

In October 2023, the CSRC said that it would take steps to strengthen the management of securities lending and restrict the lending of shares by strategic investors.

The CSRC has set priorities for its work this year, with protecting investors, enhancing the quality of listed companies and improving market stability high on its agenda, according to the Xinhua News Agency.

It will work to improve regulations on issuance pricing and quantitative trading, among other issues, and prioritize protecting the legitimate interests of investors, especially smaller ones, the top securities regulator said during a two-day work conference that concluded on Friday.

Chinese policymakers last week issued a package of major policies to boost the economy, including cutting the amount of cash that banks are required to hold as reserves to inject nearly $140 billion into the economy and lowering refinancing and rediscount rates, signaling that China is stepping up efforts to ensure a stable economic recovery in 2024.