A recent rebound in Chinese equities could face some headwinds as a colossal wave of shares is due to have their trading restrictions lifted this month.
The lock-up period for nearly 900 billion yuan ($141 billion) worth of mainland equities will end in June, the highest amount this year, according to data provided by China Merchants Securities Co.
Peak Season
Biggest batch of lock-up expiries in China this year comes in June
Sources: China Merchants Securities, Bloomberg
Note: Size of lock-up expirations calculated based on Wednesday's close
The lifting of restrictions could pose an overhang for Chinese stocks as early investors, senior executives and major shareholders may opt to sell their shares after a rebound in the past few weeks. The benchmark CSI 300 Index logged its biggest monthly advance this year in May, driven by the yuan’s appreciation and easing concerns over liquidity.
Almost half of the total value of this month’s unlocks will come from battery maker Contemporary Amperex Technology Co., with around 405 billion yuan worth of shares to be unleashed. That will likely pressure the ChiNext Index, where the stock holds the heaviest weighting. CATL has jumped about 20% this year after surging 230% in 2020.
Other companies that will see great value of shares become available for sale include securities firm CSC Financial Co., Gan & Lee Pharmaceuticals and Zhongtai Securities Co.
To be sure, the lifting of trading restrictions on shares held by insiders does not always lead to underperformance. The CSI 300 Index rose 2.2% in the first 13 sessions of January last year despite the biggest heap of monthly unlocks since 2015, before a jolt from the COVID-19 pandemic triggered panic selling.
— With assistance by John Liu, April Ma, and Mengchen Lu
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