China told fund managers to avoid big share sales ahead of Party Congress

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China told fund managers to avoid big share sales ahead of Party Congress

Two sources who have direct knowledge told Reuters that China's securities regulators told some fund managers and brokers to avoid huge share sales ahead of the Communist Party Congress next month, in an effort to avoid big market fluctuations.

The instructions were given verbally by the Shanghai and Shenzhen Stock Exchanges through so-called window guidance or unofficial policy directives with no written documents, according to one of the sources.

They asked us to not be involved in major trading activities, including massive sell-offs and buy-ins. The source said that it was a move to stabilise the market.

Another buy-side source said they received the notice. It's politically sensitive, the source said.

The sources didn't want to be named due to the sensitivity of the issue.

China's Shanghai and Shenzhen stock exchanges and the China Securities Regulatory Commission CSRC did not respond immediately to requests for comment.

China's ruling Communist Party will hold its 20th congress on October 16. It is likely that President Xi Jinping will be appointed the supreme leader in a third, five-year term and a shuffle of personnel on the decision-making Politburo.

In late July, the Shanghai Stock Exchange SSE vowed to maintain market stability ahead of the Party Congress, saying it will resolutely prevent big and swift swings in capital markets.

A compliance officer at a Shanghai-based mutual fund house said he had not received window guidance, but that helping to ensure market stability ahead of the congress is a natural responsibility for fund managers.

China's main stock benchmark CSI 300 has lost 6 per cent so far this month and more than 20 per cent so far this year.

Risk appetite has been dampened by the gloomy growth prospects as COVID-19 outbreaks, a property market crisis and heightened geopolitical tensions hurt economic growth.