China stock short positions decline following a regulatory crackdown.
China stock short positions decline following a regulatory crackdown.
Hong Kong/Shanghai: February saw a three-fold decline in short positions on the Chinese stock market, the lowest level in over three years. This decline was attributed to regulatory actions aimed at reducing speculation and restoring investor confidence.
Despite continued signs of fragility in economic development, selling pressure has eased in response to government stabilization efforts, and China's blue-chip CSI300 Index has recovered over 14% from five-year lows it reached last month.
Despite continued signs of fragility in economic development, selling pressure has eased in response to government stabilization efforts, and China's blue-chip CSI300 Index has recovered over 14% from five-year lows it reached last month.
The amount of stocks that investors had borrowed to sell short fell to 43.5 billion yuan ($6.04 billion) at the end of February, according to data from China Securities Finance Corp, a state company that offers margin financing services in the market. This is a third of the level at the end of January and the lowest since July 2020.
However, additional short bets made through stock futures or derivatives are not included in the report.
China's securities watchdog this month barred brokerages from borrowing shares to lend to short-sellers as part of a series of steps to revitalize the market. Furthermore, it was prohibited for investors to short sell equities that they had purchased that same day.
However, additional short bets made through stock futures or derivatives are not included in the report.
China's securities watchdog this month barred brokerages from borrowing shares to lend to short-sellers as part of a series of steps to revitalize the market. Furthermore, it was prohibited for investors to short sell equities that they had purchased that same day.
The regulations of the China Securities Regulatory Commission (CSRC) are intended to establish equitable conditions in a market where the majority of trading is conducted by retail investors.
Brokerages who have heeded the regulator's guidance and announced plans to limit short-selling activity include GF Securities, China Securities, and CITIC Securities.
Brokerages who have heeded the regulator's guidance and announced plans to limit short-selling activity include GF Securities, China Securities, and CITIC Securities.
Fund managers were unable to use the intraday trading method known as "T+0" due to various restrictions, according to Wei Mingsan, general manager of Zhejiang DeepWin Asset Management Co.
Fund managers are not happy about the changes.
Hedge fund manager Yuan Yuwei of Water Wisdom Asset Management stated that trading the so-called equities long-short strategy—in which a fund aims to buy winning companies while shorting underperforming ones—became more challenging as a result of the restrictions.
"For value investments, both long and short are beneficial. In the absence of short-selling, the market might be more volatile, Yuan stated, contending that market manipulators, not short sellers, should be the targets of regulators.
Fund managers are not happy about the changes.
Hedge fund manager Yuan Yuwei of Water Wisdom Asset Management stated that trading the so-called equities long-short strategy—in which a fund aims to buy winning companies while shorting underperforming ones—became more challenging as a result of the restrictions.
"For value investments, both long and short are beneficial. In the absence of short-selling, the market might be more volatile, Yuan stated, contending that market manipulators, not short sellers, should be the targets of regulators.
The discussion reveals that while they increase their supervision of high-frequency trading, leveraged trades, and short sales, Chinese regulators are balancing efficiency and fairness.
"This regulatory watchfulness makes sense in the context of maintaining market stability," stated Kher Sheng Lee, co-head of AIMA's Asia-Pacific region. AIMA is a lobbying organization that represents fund managers in more than 60 nations.
"Yet, it's crucial to strike a delicate balance between regulation and free markets."
"This regulatory watchfulness makes sense in the context of maintaining market stability," stated Kher Sheng Lee, co-head of AIMA's Asia-Pacific region. AIMA is a lobbying organization that represents fund managers in more than 60 nations.
"Yet, it's crucial to strike a delicate balance between regulation and free markets."
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