China stock exchanges step up crackdown on short-selling

An investor watches stock prices in Shanghai, China.
Aly Song | Reuters

Chinese authorities have stepped up their crackdown on short-selling of shares, with the two main stock exchanges unveiling new rules that would make it even more difficult for speculators to profit from hourly gyrations in stock prices.

The Shanghai and Shenzhen exchanges said in separate statements on Monday night that the rules, effective immediately, would prevent traders from borrowing and repaying stocks within a day.

China's exchanges and markets watchdogs are cracking down on short-selling as part of a broad government-orchestrated effort to prevent a collapse in its markets, which have already lost about 30 percent of their value since peaking in June.

Good sales, bad stocks

"This is apparently aimed at increasing the cost of shorting and easing selling pressure on the market," said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management.

He added, though, that short-selling was already difficult, referring to other efforts to limit the practice. These include a move by Chinese brokerages to limit short-selling business.

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"The government is doing whatever it can to prevent the market from falling further," Chien said.

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 market turmoil, and Beijing's unconvincing efforts to restore stability, are also playing out against the backdrop of slowing economic growth and worries over high corporate indebtedness.

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