China stock ex­changes step up crack­down on short-selling


China stepped up a crack­down on short-selling of shares on Tues­day, un­veil­ing rules that make it harder for spec­u­la­tors to profit from hourly price changes, as some of the na­tion's ma­jor bro­ker­ages sus­pended their short-selling busi­nesses.

China's stock ex­changes and mar­ket watch­dogs are crack­ing down on short­selling as part of a gov­ern­ment-run ef­fort to pre­vent a col­lapse in the coun­try's mar­kets, which have lost al­most 30 per­cent of their value since peak­ing in June.

The sell-off, which fol­lowed a dizzy­ing rally, has shat­tered in­vestor con­fi­dence in Chi­nese stocks and shaken the faith of some for­eign in­vestors in the abil­ity of the rul­ing Com­mu­nist Party to main­tain sta­bil­ity of the fi­nan­cial sys­tem.

The Shang­hai and Shen­zhen ex­changes said in sep­a­rate state­ments on Mon­day night that new rules, ef­fec­tive im­me­di­ately, banned traders from bor­row­ing and re­pay­ing stocks on the same day - a step that raises risks for short-sellers. On Tues­day, as the mar­kets re­gained ground, ma­jor bro­ker­ages Citic Se­cu­ri­ties (600030.SS) and Hu­atai Se­cu­ri­ties (601688.SS) said they would tem­po­rar­ily halt their short-selling ser­vices. They were joined by smaller ri­val Great Wall Se­cu­ri­ties.

"In or­der

to com­ply with ur­gent changes in ex­change rules and con­trol busi­ness risks, as of to­day we are tem­po­rar­ily halt­ing our short selling busi­ness," Citic said in a state­ment.

The CSI300 in­dex .CSI300 of blue chip Shang­hai and Shen­zhen stocks closed 3.1 per­cent higher. The Shang­hai Com­pos­ite In­dex .SSEC jumped 3.7 per­cent to 3,756.54 points - still well off the 4,500 tar­get set by Bei­jing as its bench­mark for a re­turn of mar­ket con­fi­dence.

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion (CSRC) has de­clared war on "ma­li­cious" short-sellers and is also scru­ti­niz­ing the use of au­to­mated trad­ing strate­gies fa­vored by hedge funds to profit from mar­ket volatil­ity.

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