THE Shenzhen and Shanghai stock exchanges announced rules Friday on share trading suspensions, saying listed firms should prevent excessively long suspensions, removing one potential roadblock to inclusion in the MSCI Emerging Markets index.

    The index compiler will decide in mid-June whether to add Chinese shares to its emerging market benchmark, a move which could direct large amounts of capital into China’s stock markets.

    In separate notices posted on their websites, the Shenzhen and Shanghai stock exchanges said share suspensions of listed companies involved in major asset restructuring cannot exceed three months, and companies conducting private placements cannot be suspended for more than one month.

    Chinese listed companies typically apply with stock exchanges to temporarily suspend trading in the event of a major event or announcement.

    But at the height of the stock market crash in mid 2015, around half the market had halted trading, and some firms extended those halts for months on end to try and ride out the volatility.

    The new rules are meant to “curb stock suspensions at will and to regulate suspensions,” the Shanghai Stock Exchange said in its announcement.

    Market insiders say firms sometimes used the previous rules to manipulate their share prices.

    Earlier in May, Shanghai Securities Journal reported that the two exchanges were planning new rules to prevent listed companies from using the prospect of a restructuring or other event to push up prices only to announce the initiative had collapsed.

    The new rules would be designed to remove a major obstacle to inclusion in the MSCI EM index, Shanghai Securities Journal said. (SD-Agencies)