China has announced a blanket ban on major shareholder selling for the next six months to try to curb crashing prices on Shanghai markets.
China is now experiencing what many consider a negative externality of free markets. The Shanghai Exchange is operating like any object would under universal gravitation. It went up a long way, it ran out of momentum and is now under rapid acceleration. In what many equity holders would consider the wrong direction!
So China has now put a six month ban on insider selling. That should restore confidence immediately. It should work about as well as the Greek Bank Holiday did in Athens. In other words, the Chinese will stop thinking this is just a drill. It will *officially* become time to panic.
Of course the government and large financial corporations have other options once they freeze a lot of money. They could send these major shareholders bonus checks for their patriotism and tell them they are wonderful human beings. The Greeks would tell you RMJ is just kidding around.
Yet this is a really good time for those shareholders to express unqualified loyalty to those in charge. Their net worth in equity just got taken hostage. It’s like the end of an NFL Training Camp. The Turk is in the building and a large number of people will need to be cut to make it under salary caps and roster limits. The freeze locks this money down. That makes the mechanisms for state or brokerage ordered confiscation possible to execute without any little pigs avoiding the abattoir chute. Getting Shanghaid is about to take on a whole new meaning in the coming six months.