China limits short-selling to counter stock-market rout, but experts doubt any respite

Beijing [China], January 29 : The China Securities Regulatory Commission has limited short-selling aiming to stem a protracted USD 6 trillion-dollar stock market rout that began in 2021, however, the experts doubt that it will be able to bring any respite to the meltdown, CNN reported.
China's top securities regulator said on Sunday that it would "fully" suspend the lending of restricted shares on bourses in mainland China.
The curbs, which came into effect on Monday, will impact shares that are held by company employees or strategic investors and are prohibited from being traded in the stock market for a certain period but can still be lent to others for short-selling, as per CNN.
Notably, China had earlier placed some limits on short-selling of shares held by strategic investors in October but the meltdown of the stock markets continued -- and analysts worry the new moves will also fall flat, CNN reported.
"The [mainland Chinese] markets were largely muted to this policy change," said Ken Cheung, chief Asian foreign exchange strategist for Mizuho Bank in Hong Kong.
The Shanghai Composite Index was up 0.3 per cent on Monday, while the Shenzhen Component Index was down 1.6 per cent. Investor sentiment has also soured after a Hong Kong court ordered Evergrande, the poster child of China's property crisis, to liquidate.
"The liquidation at least reminds investors of China's property downturn and may keep foreign investors away from returning to Chinese investments for the time being," Cheung said.
Chinese authorities have stepped up their measures to stem the stock market rout over the past week.
Key market indexes plunged last Monday, taking year-to-date losses to between 7-10 per cent, CNN reported.
This was followed by a series of unusual interventions and announcements by worried Chinese officials, Hong Kong's Hang Seng Index (HSI) rebounded to end last week up 4.2 per cent, while the blue-chip Shanghai Shenzhen CSI300 logged a 2 per cent weekly gain.
In an unprecedented move last week, Chinese regulators said they were considering evaluating the performance of the heads of state-owned companies based on their stock market value.
Short sellers borrow shares from a broker, then quickly sell them with the hopes of buying them back later at a lower price before they have to return the shares.
The regulator also told securities financing firms that borrow shares from institutional investors to wait one day before providing them to brokerages, which can then lend them to short-sellers. Previously, these shares could be immediately made available to brokerage firms, as reported by CNN.