From CNBC TV18: 2024-07-10 22:46:06

China implemented new measures to restrict short selling and quantitative trading in an effort to stabilize the stock market before a key economic policy meeting. The China Securities Regulatory Commission increased margin requirements for short selling, while China Securities Finance Corp. suspended securities lending to brokerages.

The move aims to counteract the $1 trillion market value decline since mid-May. Chinese authorities are leading Asia in restricting short sales but face challenges like the housing crisis and trade tensions. Market strategist Matt Maley believes the new restrictions could trigger a short squeeze rally amidst declining stock performance.

President Xi Jinping will hold the Third Plenum meeting on July 15, with expectations for a modest stimulus. Chinese stocks have fallen since May due to poor corporate profits, erasing gains made earlier this year. The nation’s sovereign wealth fund may be supporting markets through ETF purchases.

Under the new rules, investors must deposit 100% of the value of borrowed securities for short selling, up from at least 80%. Private funds lending stocks must raise margin ratios to 120%. Steven Leung of UOB Kay Hian Hong Kong expects existing short positions to close, with long-term market stability reliant on economic fundamentals and corporate earnings.



Read more at CNBC TV18: China cracks down on short sales, quants to boost stocks