“China stepped up its 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,” Reuters reports.
According to the news agency:
China’s stock exchanges and market watchdogs are cracking down on short-selling as part of a broad government-orchestrated effort to prevent a collapse in the country’s markets, which have lost about 30 percent of their value since peaking in June.
The Shanghai and Shenzhen exchanges said that new rules ban traders from borrowing and repaying stocks on the same day, which obviously raises risks for short-sellers.
Citic Securities said in a statement the following:
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.
The China Securities Regulatory Commission (CSRC) has declared war on speculative short-sellers as well as hedge funds utilizing automated trading strategies that profit from market volatility.
Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management Co said the following about the new rules introduced by the regulator:
This is apparently aimed at increasing the cost of shorting and easing selling pressure on the market.
A Chinese derivatives trader at a European bank in Hong Kong noted the following:
In recent days we have been often asked by mainland regulators not to hold short positions in index futures.
China’s state margin-lending agency, tasked with stabilizing the stock market, has injected 200 billion yuan ($32.21 billion) since July into five newly launched mutual funds, the official China Securities Journal said on Tuesday according to Reuters.
The market volatility, and China’s efforts to restore confidence, are playing out against the backdrop of a slowing economy and worries over high corporate indebtedness.
A key China economic indicator took a sharp turn for the worse, with the final reading for the Caixin China purchasing managers’ index (PMI) for July surprising with a drop to a two-year low.
The news release said the following:
The downturn in China’s manufacturing sector intensified at the start of the third quarter. Renewed falls in both total new work and new export orders led manufacturers to cut production at the fastest rate since November 2011.
The reading came in at 47.8, well below the 50-mark separating growth from contraction and also lower than the preliminary reading of 48.2, which also surprised markets on the downside, CNBC reports.
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