(Yicai) Sept. 27 -- Stock exchanges on the Chinese mainland are rolling out new measures in accordance with a directive issued by the securities regulator last month to rein in major stakeholders in listed companies that are trading below par from reducing their equity to help boost investor confidence and spur the ailing stock market.

Controlling shareholders and actual controllers will not be allowed to sell stocks through centralized bidding or block trading without disclosing their share reduction plans in advance, the Shanghai and Shenzhen bourses said yesterday. And for those who do declare such plans, they must finish the paring of their stake within three months.

They will also not be permitted to reduce their stake should the companies be unprofitable, if the stock price has fallen below the issue price, if the firms have not distributed cash dividends in the past three years or if the total dividends amount to less than 30 percent of the average annual net profit over the period, they added. This is in line with the announcement made by the China Securities Regulatory Commission on Aug. 27.

However, the two exchanges added that years of loss should not be counted, when calculating the average net profit for the past three years.

The new measures will restrict major shareholders in at least 2,500 companies from paring their stake, according to statistics released by Choice, a financial data provider under Eastmoney. This amounts to half of the listed companies in China.

The Beijing Stock Exchange said yesterday that, while the other restrictions will apply, it will not curb reductions in shareholdings if small and medium-sized firms have not yet issued bonuses and dividends, due to their greater vulnerability and the need to retain adequate profit to enable long-term growth.

Editor: Kim Taylor