China just banned another form of short selling

Photo by China Photos/Getty Images

Having targeted malicious short selling, China’s stock market regulator, the CSRC, has now effectively banned intraday short selling.

Overnight the Shanghai and Shenzhen stock exchanges issued statements declaring investors who sell borrowed shares must now wait one day to pay back their positions, according to a report in the state-run People’s Daily newspaper.

It’s hoped the regulatory move will stop investors selling and buying back stocks on the same day. It’s a practice which the Shenzhen stock exchange says may “amplify abnormal fluctuation in stock prices and affect market stability”.

Previously investors who bought stocks were prevented from selling on the same day. The statement announced overnight appears to be an extension of this ruling, only to short sellers.

Whether due to this change of policy or other, Chinese stocks certainly enjoyed a strong session on Tuesday. The benchmark Shanghai Composite index close up 3.69%, its largest one-day gain since July 10.

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