Stock Market News

China targets margin loans, short selling to help stabilise stocks

2024.02.05 13:48


© Reuters. FILE PHOTO: An digital board reveals Hang Seng inventory index, on the Lujiazui monetary district, following the coronavirus illness (COVID-19) outbreak, in Shanghai, China October 25, 2022. REUTERS/Aly Song

BEIJING (Reuters) – China’s securities regulator mentioned on Monday that it might tighten scrutiny of margin financing, malicious short selling and search to keep at bay dangers involving pledged shares.

The watchdog’s vow to stabilise the market comes amid rising considerations that slumping share costs might set off extra selling in a vicious spiral.

The China Securities Regulatory Commission (CSRC) mentioned it might information brokerages to give buyers extra time to reply margin calls, in order to ease downward market stress.

Margin calls require buyers to high up collateral for his or her borrowings, or unwind their leveraged bets.

So far, dangers are manageable – pressured selling totalled roughly 900 million yuan ($125.03 million) in January – and the watchdog will guarantee secure operations of the nation’s 1.6 trillion margin financing enterprise, the CSRC mentioned.

In a separate assertion, the CSRC mentioned it might spur its crackdown on unlawful actions that revenue from current market volatility.

“Market manipulation and malicious shorting seriously erode people’s wealth, and stand on the opposite camp of individual investors,” the CSRC mentioned.

The CSRC vowed “zero tolerance” in opposition to ill-intended short sellers, saying those that dare flaunt the regulation will “lose their shirts and rot in jail”.

Regarding worries about main shareholders in China-listed corporations who had borrowed in opposition to their holdings additionally going through margin calls, the CSRC mentioned dangers had been below management.

So far this yr, firm shareholders have been pressured to liquidate pledged shares price simply 27.4 million yuan, which is tiny, the CSRC mentioned.

Although greater than 100 main shareholders have supplemented their collateral this yr, such actions will not lead to involuntary selling of shares, the watchdog mentioned.

“We will closely monitor the situation and take forceful measures to prevent risks involving pledged shares,” the CSRC mentioned.

($1 = 7.1982 renminbi)

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