The China Securities Finance Corp (CSFC) denied on Thursday it had sold shares in violation of regulations during the recent market rout, but admitted it had reduced its holdings in some companies by transferring stakes.
The state-owned margin lender, Beijing’s leading institution trying to prop up the wobbly stock market, told state media it had not sold off shares in any listed firm but had transferred shares it bought during the rescue period to unnamed mutual funds in order to bring itself below a regulatory threshold.
The denial to the Shanghai Securities Journal and the Xinhua News Service among others, highlights the wary mood of Chinese stock market investors, who have become highly sensitive to any signs that the government’s commitment to putting more funds into the market to re-start a bull market is flagging.
“The current holding percentages of CSFC are in line with related laws and regulations, as well as the requirements of stock exchanges,” Xinhua quoted the CSFC as saying.
The reports follow documents published by the Shanghai Stock Exchange on Wednesday that showed the CSFC cut its stake in a major dairy producer below 5 percent.
Regulations issued by the China Securities Regulatory Commission (CSRC) on July 8 prohibited major stakeholders in Chinese listed companies – those holding more than 5 percent in a given firm – from selling shares for six months, threatening strict punishment.
The block on sales was part of an overall policy package, including increased investment from state-owned financial institutions and others, to support the market after it plunged nearly 30 percent in just a few weeks from mid-June.
But in the process of buying shares to stem the sell-off, the CSFC, controlled by the CSRC, appears to have inadvertently acquired stakes over 5 percent, media reports said.
For example, CSFC held two tranches of shares in Inner Mongolia Yili Industrial Group, representing 3.39 percent and 2.66 percent of the company’s total shares on July 9, the stock exchange statement showed. That brings the total stake to 6.05 percent.
However, CSFC’s holding in one of the tranches declined to 1.62 percent by July 17, bringing its total stake below 5 percent to 4.28 percent, the statement said.
CSFC could not be immediately reached by Reuters for comment. Calls to the CSRC requesting comment were not answered.
The Hong Kong Securities Clearing Co (HKSCC) also reduced its stake from 5.22 percent to 4.92 percent over the same period, according to the statement. The HKSCC is a wholly-owned subsidiary of the Hong Kong Exchanges and Clearing Ltd (HKEx) and can act as a nominee or proxy for other investors.
The HKEx said it is not the beneficial owner of the shares in an emailed statement to Reuters.