The Shanghai Stock Exchange (SSE) is proposing to raise the
maximum share price fluctuation for listed companies from 10
percent to 20 percent per day.
The move comes amidst a series of proposals which will shift
trading mechanisms under a joint study by the SSE and Guotai Junan
Securities Co. Ltd. The proposals are being targeted to cater to a
wider range of investor market demands.
Questionnaires submitted by investors?from 23 regional
branches and five subsidiaries of Guotai Junan Securities, were
carefully analyzed by researchers.
Among their findings was the realization that the current 10
percent limit had encouraged price fluctuations after the stock
trading was suspended but had been ineffectual in preventing sharp
declines.
Given that more established stock exchanges such as those in New
York or Hong Kong have no price limits, researchers have suggested
China slowly pare down the price limit and implement a "circuit
breaker". A "circuit breaker" is a system which halts trading when
the stock moves up or down by a certain percentage, to enable
investors to take a cooler, more rational view of the
stocks.?
Stocks are rapidly becoming a favored method for Chinese
investors to use their extra cash. On February 27, Chinese stocks
suffered their biggest single-day fall in a decade, plunging 8.8
percent.
(Xinhua News Agency March 15, 2007)