China regulator suspends restricted share lending

China has fully suspended the lending of restricted shares on Monday, indicating that regulators are taking serious steps to revive investor confidence, with additional measures anticipated soon, experts said.

The China Securities Regulatory Commission said on Sunday that it would temporarily restrict the lending of all restricted shares, effective on Monday, to strengthen supervision and strictly crack down on behaviors that use securities lending as a cover for illegal shareholding reduction.

Also in a bid to fairly safeguard the interests of smaller investors, securities finance firms that borrow shares will need to wait one day before offering them to brokerages for securities lending instead of the stock being immediately available, starting from March 18, the commission said.

Sunday's move came just after the commission vowed on Friday to optimize regulations on securities lending and other areas, indicating that the securities regulator is striving to make concrete, fast steps to realize a shift in regulatory focus from facilitating financing to fostering a market that prioritizes the interests of investors, experts said.

"The enhancements in the securities lending rules are primarily indicative of the regulatory goal to create a market that is centered around investors," said Luo Zuanhui, an analyst at Shenwan Hongyuan Securities.

Luo said in a report that additional supportive measures are expected to be gradually unveiled, covering areas such as the governance of listed companies, the inclusion of market capitalization in the evaluation system for central State-owned enterprises and incentives for medium and long-term funds to invest in the A-share market.