Foreign investors will from next week be able to short sell select mainland Chinese shares via the Hong Kong-Shanghai trading link, the latest in a series of regulatory moves to open China's markets to overseas capital.
The eligible shares are equivalent to nearly three-quarters of mainland stocks listed under the Stock Connect trading scheme, the Hong Kong Exchanges and Clearing said in a statement.
The daily volume of short positions on a stock would be capped at 1 percent, and at no more than 5 percent over 10 consecutive days, the statement said.
Despite the limits, traders said the new rules are likely to encourage hedge funds and other investors to use Stock Connect, which was launched in November and allows foreign investors to directly trade Shanghai shares from Hong Kong.
The trading curbs, as well as other outstanding technical hurdles, would have to be removed, however, if China wants to be included in the benchmark MSCI emerging market index, a move that would help attract hundreds of billion of dollars of investments from global index-tracking funds.