The China Securities Regulatory Commission (CSRC) said on Monday that it will closely monitor risks from pledged stocks and take targeted forceful measures to prevent such risks, noting that the current increase in major shareholders adding collateral to their stock pledge is of protective nature and will prevent forced liquidation.
China's securities watchdog said the risks from pleaded stocks have seen a marked decrease since 2018 as government departments including the CSRC worked jointly to defuse risks in the sector.
As of February 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, while the outstanding value of pledged stock financing dropped to 1.59 trillion yuan ($220 billion) from 2.69 trillion yuan in 2018, according to CSRC.
The number of public companies in which top shareholders had pledged over 80 percent of its stocks decreased from 702 to 227, the CSRC said, noting that year to date, the scale of pledged stocks further shrank from the level seen at the end of 2023.
From January 1 to Friday, a total of 106 statements have been issued by listed firms stating that the major shareholders are increasing collaterals, which is more than the number seen during the same period in 2023.
However, the CSRC said such increase is a protective measure as agreed by banks, brokerages and shareholders in the event of a margin call, and such increase will not lead to forced liquidation.
The watchdog said that it is guiding institutions such as brokerages to enhance the resilience of liquidation level to promote the stable operation of the market.
The value of forced liquidation triggered by stock pledge breach so far this year stood at 27.40 million yuan, which only accounts for a very slight percentage of the daily trading volume of the stock market, the regulator said.