China's securities regulator vows to prevent stock pledge risks

BEIJING - China's securities regulator on Monday said it will closely monitor and take effective measures to prevent risks from pledged shares.

From Jan 1 to Feb 2 this year, a total of 106 statements have been issued by listed firms about major shareholders' supplementary stock pledge. The number is higher than that registered in the same period of last year, said the China Securities Regulatory Commission.

However, such moves are a protective measure agreed between financial institutions such as banks and brokerages and shareholders, and they will not lead to forced liquidation, said the commission.

The commission said it will guide brokerages and other financial institutions to increase the flexibility of the liquidation line and promote the smooth operation of the market.

Data from the Shanghai and Shenzhen bourses showed that the total amount of forced liquidation from stock pledge default so far this year stood at 27.4 million yuan (about $3.86 million), which only accounts for a very slight percentage of the daily trading volume of the stock market, the regulator said.

The risks from stock pledge have significantly declined on the Shanghai and Shenzhen markets since 2018, the regulator said.

As of Feb 2, the proportion of the value of pledged shares have dropped from 10.51 percent of the total market value at the peak in 2018 to 3.38 percent, said the regulator.

The number of public companies in which top shareholders had pledged over 80 percent of its stocks decreased from 702 to 227, the regulator said, noting that year to date, the stock pledge scale shrank from the level seen at the end of 2023.