Chinese regulators issued a new ruling on Wednesday prohibiting stockholders who own more than five percent shares in a corporation from selling them within the next six months. Authorities hope that the latest directive can at least pare down the selling frenzy in the Chinese stock market. 

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The Guardian reported that regulators immediately halted trade in Shanghai and Shenzen after both indices suffered losses by more than ten percent in just ten minutes of trade.

Thursday morning's trade on the Shanghai stock market has resulted in a drop of almost 4 percent. Last Wednesday, it suffered a six percent loss. On that same day, other Asian markets such as Japan's Nikkei lost three percent, while Hong Kong's Hangseng also lost almost 6 percent, according to Aljazeera.

Government authorities have issued other directives and incentives to help prevent the Chinese stock index form falling but to no avail.

BBC reported that Chinese stocks have fallen by around 30 percent from their peak value last month, with the loss amounting to around $3 trillion. Around 1,300 listed firms have announced that they have stopped selling their shares to avoid further drops in their value. It is also estimated that the ongoing market crisis affects 90 million Chinese individual investors. Despite the current drop, it cannot be denied that Chinese stocks rose by more than 100 percent compared to last year.

According to the BBC, there are several possible reasons for Chinese stock index' continuing downtrend. Ironically, government intervention may be doing more harm than good. The series of incentives and interventions may have sent the wrong message to investors.

About 90 million individual investors represents around 80 percent of the total Chinese stock market players, the rest are institutional investors. IG Markets specialist Chris Weston believes that "herd mentality" of the individual investors is triggering the massive sales of Chinese stocks.

Many investors, who bought the stocks last year or earlier, have seen the value of their stocks rise by more than a hundred percent. The recent losses in the Chinese market has caused many of these investors to sell their stocks even if they may have liked to keep the shares for the long term.

TagsChinese Stock Market, Chinan stock index, Shanghai Composite Index, Shenzen composite index, China Securities Regulatory Commission (CSRC), China insurance regulatory commission