The Shanghai Stock Exchange (SSE) has proposed raising the maximum share price fluctuation for listed companies from 10 to 20% per day. The move is part of a package of proposals for changing trading mechanisms based on a study jointly conducted by SSE and Guotai Junan Securities Co. Ltd reports China's Xinhua agency.
The proposals are reportedly aimed at satisfying the different market demands of investors. Researchers analyzed questionnaires submitted by investors from 23 regional branches and five subsidiaries of Guotai Junan Securities. They found that the current 10% price rise limit had fueled price fluctuations after the stock trading was suspended and it had been ineffective in stopping sharp falls. There are no price limits in mature stock markets, for example, the New York Stock Exchange and Hong Kong Stock Exchange. The researchers suggest China should gradually abolish the price limit and recommended a "circuit breaker", 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. With rising incomes, Chinese investors are increasingly turning to stocks as a way to invest their extra cash. On February 27, Chinese stocks suffered their biggest single-day fall in a decade, plunging 8.8%. On Wednesday shares in Shanghai and Shenzhen closed lower on fears of fresh credit-tightening measures and weakness in overseas markets with banks and property stocks among the main losers. The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed down 58.46 points, or 1.97% at 2,906.33, after moving between 2,868.31 and 2,934.45. "The sharp falls in overseas markets such as the US and Japan prompted selling here, while worries about a possible hike in interest rates or bank reserve ratio also produced pressure" said Xu Ming, an analyst at Shiji Investment.