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Tingshu Wang/Reuters/File
A Chinese national flag flies in front of the China Securities Regulatory Commission (CSRC) building on Financial Street in Beijing, China.
Hong Kong
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China’s top securities regulator has limited short selling, in its latest effort to stop a prolonged $6 billion dollars stock market crash that started in 2021.
The China Securities Regulatory Commission announced on Sunday that it would “completely” suspend the lending of restricted shares on mainland Chinese exchanges.
The restrictions, which came into effect on Monday, will affect shares held by company employees or strategic investors and whose trading is prohibited. on the stock market for a given period, but can still be lent to others for short sale.
Short sellers borrow shares from a broker and then sell them quickly in hopes of buying them back later at a lower price before having to return the shares.
The regulator also told securities finance companies that borrow shares from institutional investors to wait a day before handing them over to brokerages, which can then lend them to short sellers. Previously, these shares could be made immediately available to brokerage houses.
Earlier in October, China had imposed some limits on short selling of stocks held by strategic investors, but stock markets continued their collapse and analysts fear the new measures will also fail.
“(Mainland) markets were largely silent on this policy change,” said Ken Cheung, chief Asian currency strategist at Mizuho Bank in Hong Kong.
On Monday, the Shanghai Composite Index rose 0.3%, while the Shenzhen Component Index fell 1.6%. Investor sentiment has also deteriorated after a Hong Kong court ordered Evergrandethe example of the real estate crisis in China, to be liquidated.
“The sell-off at least reminds investors of China’s real estate crisis and may prevent foreign investors from returning to Chinese investments for the time being,” Cheung said.
Bloomberg/Getty Images
The Shenzhen stock exchange is the second largest in mainland China after Shanghai.
Calm returns but challenges persist
Chinese authorities have stepped up their measures to stem the stock market slide over the past week.
The main market indices plummeted last Monday, bringing losses so far this year to between 7% and 10%.
Then, following a series of unusual interventions and announcements by concerned Chinese officials, Hong Kong’s Hang Seng Index (HSI) recovered to end last week up 4.2%, while the blue-chip index Shanghai Shenzhen CSI300 posted a 2% weekly gain.
Last Tuesday, Bloomberg reported that Chinese authorities were considering ordering state-owned companies to use money held in offshore accounts to buy stocks worth up to 2 trillion yuan ($282 billion).
A day later, in an unprecedented move, regulators said they were considering evaluating the performance of state company heads based on their value on the stock market.
On the same day, Li Yunze, director of the recently created National Financial Regulation Administration (NAFR), promised at an international financial conference in Hong Kong to further open China’s $64 trillion financial industry to international investors.
Hours later on Wednesday, Pan Gongsheng, governor of the People’s Bank of China, unexpectedly announced that the central bank would cut the amount of cash banks must hold as reserves, which could provide 1 trillion yuan ($141 billion) ) long-term. liquidity to the economy.