Exclusive: China watchdog extends pursuit of short sellers to HK, Singapore - sources

Fri Jul 31, 2015 6:48am EDT
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By Michelle Price and Pete Sweeney

HONG KONG/SHANGHAI (Reuters) - China is pressing foreign and Chinese-owned brokerages in Hong Kong and Singapore to hand over stock trading records, sources said, extending its pursuit of "malicious" short sellers of Chinese stocks to overseas jurisdictions.

China's main share markets, both among the world's five biggest, have slumped around 30 percent since mid-June and authorities have been flailing in efforts to prevent a further sell-off that could spill over into the wider economy.

The markets regulator, the China Securities Regulatory Commission (CSRC), wants the trading records to try to identify those with net short positions who would profit in case of further falls in China-listed shares, three sources at Chinese brokerages and two at foreign financial institutions said.

At its regular press conference on Friday, the CSRC said it had not directly contacted top executives at Hong Kong brokerages. It also noted that it was normal, in the course of an investigation, to reach out to "relevant parties".

It denied other unnamed media reports that regulators had required Chinese brokerage heads to attend meetings in Beijing or Guangzhou.

The regulator has declared war on "malicious short sellers" or those it deems are trying to profit from a fall in share prices, rather than adopt a short position as a financial hedge.

"The implied threat by the CSRC is that anything that is not a hedge is a no-no," said a source in Hong Kong with knowledge of the requests. This person added that foreign brokers were likely to comply as best they could with the requests.

"When the CSRC makes an offer, you cannot refuse it."   Continued...

An investor checks on his mobile phone in front of an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China, July 29, 2015.  REUTERS/Stringer