A large number of non-tradable shares will pour into the stock market a week after the National Day holiday, potentially leading to turbulence in the financial markets, according to a report from the Shanghai Securities News Saturday.
Analysts are concerned that the selling pressure from major corporations, unlocking shares acquired at a low cost a few years ago would possibly overwhelm the market, and therefore counteract the rising share prices.
Statistics from Southwest Securities show that a total of 1.92 trillion yuan (281.2 billion U.S. dollars) unlocked non-tradable shares from 27 companies could be publicly traded beginning the second week of October, which is almost 12 times more than those traded a month ago.
Industrial and Commercial Bank of China (ICBC), Sinopec, and Shanghai International Port Group (SIPG) are the top three companies among all of those who are allowed to unlock shares. The non-tradable shares of the three companies will amount to 236 billion, 57 billion and 13 billion respectively.
In addition, the non-tradable shares to be unlocked next month will account for over 40 percent of the total number unlocked this year.
The newspaper said the number of non-tradable shares, which is estimated at 319.2 billion, will be the largest amount since the Chinese non-tradable share reform plan was carried out in 2005.
Stock analysts believe that the impact of the flood can be mitigated if State-owned enterprises can hold onto their tradable shares.
Zhang Gang, an analyst from Southwest Securities, told the Global Times that the unlocked non-tradable shares would not result in a similarly large reduction of shareholders' holdings, because most of the shares are held by State-owned companies, which have no need to divest in a hurry.
But Zhang also warned that the large number of the unlocked non-tradable shares would cause concern in the market.
He further stated that the unstable economic climate may lead shareholders with unlocked non-tradable shares to decide to get rid of their holdings.