China bars investors from lending securities during restricted periods

The move suggests that more policies to support the continent's stock markets will be unveiled in the coming weeks and months, analysts said.

"In the past, some shares held by original shareholders or core investors had selling restrictions," said Kenny Ng Lai-yin, strategist at Everbright Securities International. “However, they could still sell the corresponding shares on the market by lending their shares. The new rule now restricts this situation, which helps reduce selling pressure on the market.”

While the policy is expected to have "a positive impact on the market," its direct effect is likely to be limited as stock market performance depends on several factors, including investors' views on the Chinese economy and issues. geopolitics. such as global interest rates, Ng said.

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Earlier this month, authorities announced that China's economy expanded 5.2 percent in 2023, more than expected but at its slowest pace in three decades, except during the period of the coronavirus pandemic.

This year, growth potential remains unstable, London-based research firm Capital Economics said in a note, adding that the world's second-largest economy lost momentum in the fourth quarter of 2023.

The latest initiatives will surely show investors that Beijing is committed to maintaining market stability and improving investor confidence, Ng added.

"I believe there will be more favorable policies in the future to maintain market stability on the continent," he said.

“We have seen the mainland actively promoting capital markets since the second half of last year, and current policies are in line with this trend. “The stability of the continent’s investment market also plays a positive role in the future economic recovery.”

This view is shared by Zhou Ling, a hedge fund manager at Shanghai Shiva Investment in mainland China's financial hub.

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"By suspending restricted stock lending, the regulator is sending a message to the market that more policy support measures will be implemented to curb the decline in stock prices," Zhou said. "The move is aimed at curbing short selling to stabilize the current weak market."

Other measures to boost the market could include establishing stabilization funds, further cutting stamp duty and requiring companies and state institutions to refrain from dumping shares, he added.

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Meanwhile, the Shenzhen Stock Exchange fell 9.8 percent on Jan. 22, when it ended the trading day at 8,479.55, compared with 9,401.35 at the beginning of the year. It closed on Friday trading at 8,762.33.

The People's Bank of China on Wednesday announced a surprise cut in banks' reserve requirement ratios starting Feb. 5, releasing 1 trillion yuan ($140 billion) of liquidity into the market. The decision came following Premier Li Qiang's call for "stronger measures" to help stabilize the stock market.

Additional information from Daniel Ren