The China Securities Regulatory Commission called on local institutional investors Monday to play a bigger role in domestic equity markets, with the goal of fostering a more stable environment favorable to long-term investing.
CSRC said in a news release that to “implement the spirit” of recent Beijing directives to support the development of listed companies and maintain capital market stability, local institutional investors should boost their allocations to equity markets.
The regulator encouraged China’s “social security, pension, trust, insurance and wealth management institutions to allocate more funds to equity assets … especially high quality listed companies stock investment.”
Listed companies will be encouraged to repurchase shares to stabilize stock prices, raising funds through various channels “such as issuance of preferred shares and bonds to implement share repurchase,” the CSRC said.
In addition, “major shareholders, directors, supervisors and senior executives” will be encouraged to hold the shares of listed companies for a long time, “and actively stabilize the stock price by increasing their holdings when the company’s stock falls sharply,” the CSRC said.
Ivan Shi, director of research at Z-Ben Advisors, a Shanghai-based consulting firm, said the CSRC’s latest announcements support the short-term efforts of China’s Financial Stability and Development Committee to address investors’ concerns and calm the market while continuing to pursue the bigger goal of making the mainland’s equity markets more friendly for long-term institutional investors.
“Developing a large institutional investor group has always been one of CSRC’s key agendas over the past several years,” Mr. Shi noted.