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China's market watchdog calms investors by dismissing sudden increase in short selling

China's market watchdog calms investors by dismissing sudden increase in short selling
China's market watchdog calms investors by dismissing sudden increase in short selling


China's securities regulator moved to appease investors, after a social media post reported a surge in short stocks last week, its second attempt this month to drive the market higher , even as a rebound shows signs of running out of steam.

The increase in short bets, amounting to some 170 million shares, on June 12 was mainly due to the semi-annual rebalancing of major stock indexes, the China Securities Regulatory Commission (CSRC) said in a statement . statement on its website Sunday evening.

The post, which was not identified, only highlighted data on newly shorted stocks while ignoring numbers for stocks whose short positions were closed due to their removal from stock gauges after the review, the watchdog said.

The number of shares sold short fell by 460 million on June 11 and 12, with an equivalent decrease in value of 5.4 billion yuan ($744.3 million), the CSRC said.

The office of the China Securities Regulatory Commission in Beijing. Photo: Simon Chanson

In the future, the CSRC will fully evaluate and refine the rules on short selling and strengthen the anti-cycle adjustment, the watchdog said. At the same time, we will strengthen supervision and severely punish irregularities, such as illegal stake reductions by large shareholders profiting from short selling.

The move underscores the CSRC's determination to put a floor under China's near-$9 trillion stock market, which has shown signs of running out of steam after rebounding 11 percent from its February low. . The stock market regulator published on June 6 a statement minimize the risk of delisting of small capitalization stocks in the context of liquidation of these companies.

The crackdown on short selling is part of a series of measures unveiled by the CSRC over the past year to halt a three-year market decline. The regulator barred brokerages from lending to short sellers shares borrowed from institutional investors and banned the short selling of stocks that are still in the lockup period.

These rules are still strictly enforced and there is no change to this, the CSRC said in the statement.

The outstanding value of stocks sold short on mainland stock exchanges totaled 33.6 billion yuan on Friday, the lowest in four years, according to Bloomberg data. Its value fell 81% from its peak of 173.7 billion yuan on September 10, 2021, according to the data.

China's stock markets have stabilized this year after a series of regulatory interventions, including state purchases and restrictions on quantitative investment strategies. Beijing also replaced the head of the CSRC in February, appointing Wu Qing, a veteran stock regulator known for his tough approach.

Wu will be in the spotlight on Wednesday when he delivers a keynote speech at the Lujiazui Financial Forumwhich should shed light on new political support for the stock market.




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