China’s securities regulator, the China Securities Regulatory Commission, is implementing new measures to tighten regulations on securities short selling, aiming to curb market speculation and maintain stability.
Starting Monday, China’s securities regulator will completely halt the lending of restricted shares. Additionally, the China Securities Regulatory Commission plans to restrict the efficiency of certain securities lending in the securities refinancing market as of March 18.
Short selling, allowing investors to profit from stock price declines, is closely monitored in China, with strict criteria for participation introduced in the 1990s. Qualified investors must meet requirements such as a good credit record and a minimum investment experience of two years. Short selling is permitted only for specific stocks meeting certain conditions.
The CSRC’s recent measures involve an increase in margin requirements for short selling, making it costlier for investors. Additionally, the regulator plans to introduce a suspension mechanism for stocks facing significant short selling pressure, enabling temporary trading halts if they are deemed at risk of sharp price falls.
The announcement follows a period of heightened market volatility in China, with significant stock market declines prompting regulatory intervention. These measures align with China’s broader goal of maturing its financial markets and mitigating speculative bubbles.
In summary, the CSRC’s new measures focus on maintaining market stability by addressing potential market manipulation and speculation associated with short selling. While recognizing short selling as a legitimate strategy, global regulators are working to strike a balance that fosters market activity without risking instability.
Last week, China Equity Funds experience the second-largest weekly inflow in history, totaling $12 billion.
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