China announces more short-selling curbs to stabilize stocks

BEIJING – China’s securities regulator on Wednesday announced more curbs on short-selling and pledged tighter scrutiny of computer-driven program trading in its latest effort to bolster a flagging stock market.

Short-selling, involving the sale of borrowed shares, is often blamed in China by regulators and investors for exacerbating market declines.

The China Securities Regulatory Commission (CSRC) said securities re-lending – in which brokers borrow shares for clients to short sell – would be suspended. In addition, margin requirements would be raised for short-sellers.

The CSRC also urged stock exchanges to publish detailed rules to regulate program trading, especially high-frequency trading.

The new measures come after seven straight weeks of losses for China’s blue-chip CSI300 index amid concerns over the health of the country’s economy.

China has taken a series of measures to discourage short-selling since last August, and the latest moves are “in response to investor concerns, and aimed at stabilizing the market,” the CSRC said in a statement.

The latest curbs are “timely, and will help boost market sentiment,” said Yang Delong, chief economist at First Seafront Fund Management Co.

New securities re-lending will be suspended from Thursday, while existing contracts must lapse by the end of September, the regulator said.

Meanwhile, stock exchanges will raise the minimum margin requirement ratio to 100% from 80% for short-selling, the CSRC said, adding the bar would be higher for hedge funds.

The regulator, which launched a crackdown on computer-driven quant funds early this year, said it would further restrict high-frequency trading to ensure a fair market.

High-frequency trading accounts have slumped more than one-fifth so far this year to about 1,600 at the end of June, according to the watchdog.

(Reporting by Beijing newsroom and Shanghai newsroom; Editing by Andrew Heavens and Mark Potter)