China tries to halt stock market plunge with short-selling curbs

“All the government’s measures including restrictions on short selling are working now”, Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co., told Bloomberg News.


Chinese stock markets shot up Tuesday, with the Shanghai Composite closing with a 3.7% gain and the Shenzhen market finishing with a 4.8% jump. The small-cap ChiNext board surged 6.1% to 2546.16.

In Hong Kong, the Hang Seng index dipped in late trading to close down 0.02 per cent at 24,406.12 points.

CITIC insisted it will support the government’s regulatory measures to stabilize the stock market.

Citadel confirmed on Monday that an account managed by Ghosen Futures, a Citadel subsidiary in China, was one of those suspended.

Investors who sell borrowed shares must wait one day to pay back their positions, according to statements from the Shanghai and Shenzhen stock exchanges issued on Monday night.

Moreover, Judy Zhang, a China banking analyst for BNP Paribas, said the crackdown won’t “have a significant impact” on brokers’ revenue as they may stand to earn more interest income thanks to a longer loan period.

Nevertheless, officials’ moves could help fix investor sentiment.

China’s stock markets are dominated by local retail investors who have little use for the trades.

Major brokerages Citic Securities, Huatai Securities and Great Wall Securities also said they would temporarily suspend their short-selling services.

The announcements follow Chinese regulators’ deepened scrutiny of automated trading in recent days.

Chinese markets were the best performers earlier in the year, but have since come back to earth. The Shenzhen Component Index fell 0.18% to close at 12,374.25 pts. After a brief stabilization, equity markets in China have continued to fall, and have lost a staggering $3 trillion in notional market value since mid-June.

Expectations of a hike have slowly pushed up U.S. Treasury yields and widened the dollar’s premium over the euro. Oil prices were recovering from recent lows but Brent crude was still below $50 a barrel while WTI was hovering around $45.

China’s Commerce Ministry said import growth is likely to remain at a low level on Tuesday, just a day after data from a private survey showed China’s factory activity shrank more than initially estimated in July. It wasn’t a surprise though that the downslide created a havoc on copper, one of the most economically sensitive metals, which now languishes at a six-year low.

The CSI 500 is a list of stocks that the China Securities Index ranks in descending order according to their daily average total market capitalization over the past year. A protracted commodities slump has pressured Australia’s resources-dependent economy, and nonmining investment continues to lag.


The northbound quota for the Hong Kong-Shanghai Stock Connect, now set at 13 billion yuan, saw net outflows of 0.20 billion yuan. Earlier, Gov. Glenn Stevens had warned the Aussie should and would weaken further.

China Daily