Sources: China seeks to stabilize markets before the Communist Party Congress

Sources: China seeks to stabilize markets before the Communist Party Congress

SHANGHAI (Reuters) – China’s securities regulators have told some fund managers and brokers to avoid massive stock sales ahead of next month’s Communist Party congress in a bid to avoid massive market volatility, two sources familiar with the matter told Reuters.

One of the sources said the instructions were given orally by the Shanghai and Shenzhen stock exchanges through a so-called “window directive,” or informal political directives without written documents.

“They (us) have asked us to avoid unusual trading activities, including heavy selling and buying. It is basically a move to stabilize the market,” the source said.

Another buy-side source said they also received the notice. “It’s politically sensitive,” the source said.

The sources requested anonymity due to the sensitivity of the issue.

The Shanghai and Shenzhen stock exchanges and the China Securities Regulatory Commission did not immediately respond to Reuters requests for comment.

The ruling Communist Party of China opens its twentieth congress on October 16. It will likely end with President Xi Jinping appointing a third five-year term as supreme leader and mixing in the Politburo for decision-making.

In late July, the Shanghai Stock Exchange (SSE (LON :)) pledged to maintain market stability ahead of the party conference, saying it would “resolutely” prevent large and rapid fluctuations in the capital markets.

A compliance officer at the Shanghai mutual fund house said he had not received effective guidance, but that helping to ensure market stability ahead of the conference was “a natural responsibility” for fund managers.

The main Chinese stock index CSI 300 has lost nearly 6% so far this month and more than 20% so far this year.

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Risk appetite has been dampened by bleak growth prospects with the outbreak of the COVID-19 virus, the real estate market crisis and heightened geopolitical tensions hurting economic growth.

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