China cracks down on short selling

Leading stock exchanges increase measures to prevent speculators from short selling to balance volatility of stock market

Photo by: Reuters
Photo by: Reuters

China’s two main stock indexes, the Shanghai Composite and the Shenzhen Component, announced that they have revised the rules on short selling shares on Tuesday to make it harder for traders to take advantage of buying and selling activities within the same day. 

Investors have become wary of trading in China’s volatile stock exchanges, some of which have lost close to 30 percent of their value since mid June, as economists predict a looming crisis in the world's second largest economy. 

On Monday evening the Shanghai and Shenzhen stock exchanges released two separate statements on their official websites, declaring that short sellers must wait at least one day to repay stocks which they have borrowed. This mesaure is intended to reduce the risk of abnormal fluctuations in the prices of stocks.   

In response to the announcement, the CSI300 index closed 3.1 percent higher and the Shanghai Composite Index ticked up 3.7 percent to 3,756.54 points. However, Beijing believes that in order to secure market confidence the Shanghai Composite must meet a target of 4,500 points.

Meanwhile, the China Securities Regulatory Commission (CSRC) has been tightening rules on suspicious automated trading accounts. On Monday CSRC had 38 trading accounts, including US based hedge fund firm Citadel Securities, locked out of trade. 

TRTWorld and agencies