China stock exchanges step up crackdown on short-selling

Tue Aug 4, 2015 3:56am EDT
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By Nathaniel Taplin and Saikat Chatterjee

SHANGHAI/HONG KONG (Reuters) - 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 short-selling 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: Quote) and Huatai Securities (601688.SS: Quote) 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.   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