China stock exchanges step up crackdown on short-selling
China stepped up its 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 shortselling businesses.
China’s stock exchanges and market watchdogs are cracking down on short-selling as part of a broad government-orchestrated effort to prevent a collapse in the country’s markets, which have lost about 30 per cent 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 and Huatai Securities 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 of blue chip Shanghai and Shenzhen stocks rose 1.2 per cent at the end of the morning session. The Shanghai Composite Index gained 1.3 per cent to 3,671.49 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 scrutinising the use of automated trading strategies favoured by hedge funds to profit from market volatility.
OnMonday, it froze a trading account linked to Citadel Securities, a unit of the US group that also owns hedge fund Citadel LLC— the first time in the crackdown that a foreign firm confirmed one of its Chinese accounts had been suspended. Citadel said it complied with all local laws and regulations.