 takes measures to calm investors and stabilize the stock market after a social media post highlights a spike in shorted stocks.){kind=link}
China’s securities regulator has stepped in to reassure investors following a social media post that drew attention to a surge in shorted stocks last week. This marks the second time this month that the China Securities Regulatory Commission (CSRC) has sought to bolster market confidence as signs of a market rebound begin to wane.
The spike in short bets, involving approximately 170 million shares on June 12, was primarily due to the semi-annual rebalancing of key stock indices, according to a statement from the CSRC on Sunday night. The regulator clarified that the social media post, which was not identified, had only highlighted the new shorted stocks, ignoring the figures of stocks whose short positions were closed out following their removal from stock indices.
The CSRC reported that the outstanding number of shorted stocks decreased by 460 million on June 11 and 12, with a corresponding value drop of 5.4 billion yuan (US$744.3 million). “Moving forward, the CSRC will fully evaluate and fine-tune the rules on short selling and strengthen counter-cycle adjustments,” the regulator stated. It also emphasized its commitment to increased oversight and severe penalties for irregularities, such as illegal stake reductions by major shareholders exploiting short selling.
This intervention underscores the CSRC’s determination to support China’s nearly US$9 trillion stock market, which has shown signs of faltering after an 11 percent rebound from a February low. On June 6, the stock market regulator issued a statement downplaying the delisting risk of small-cap stocks amid a sell-off in these companies.
The crackdown on short selling is part of a series of measures introduced by the CSRC over the past year to counter a three-year market decline. These measures include banning brokerages from lending stocks to short sellers that are borrowed from institutional investors and prohibiting shorting of stocks still in the lock-up period. “These rules are still being strictly implemented and there are no changes to that,” the CSRC reaffirmed.
As of Friday, the outstanding value of shorted stocks on mainland exchanges totaled 33.6 billion yuan, the lowest in four years, according to Bloomberg data. This value has fallen 81 percent from its peak of 173.7 billion yuan on September 10, 2021.
China’s stock markets have stabilized this year following several regulatory interventions, including state purchases and curbs on quantitative investment strategies. In February, Beijing appointed Wu Qing, a seasoned stock-market regulator known for his tough approach, as the head of the CSRC.
Wu is set to deliver a keynote speech at the Lujiazui financial forum on Wednesday, where he is expected to provide further insights into policy support for the stock market. His address is anticipated to outline additional measures to sustain market stability and investor confidence.
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