Violent sell-off in the Chinese stock market

China stock market@ericbeeboHong Kong futures are getting crushed.

There’s a major sell-off going on in China right now.

Chinese stock market futures are down by more than 5% following news that regulators are tightening the screws on traders.

“The China Securities Regulatory Commission banned the margin trading businesses of brokerages from taking part in umbrella trusts, while the Securities Association of China said fund managers can lend shares for short selling,” Bloomberg’s Kyoungwha Kim.

Simply put, margin trading means trading with borrowed money. Banning this type of trading for certain accounts means less liquidity in the markets.

Markets close to China are also feeling the pain.

“[Hong Kong] H-share futures now -5.9% — definitely spillovers from intro of real money share lending for short selling,” Reuters’ Eric Burroughs tweeted.

The Chinese stock market has been the hottest market in the world by a mile. Before Friday’s close, the Shanghai Composite index was up 32% since the beginning of the year and 110% since a year ago.

Here’s a one-year look at the Shanghai Comp.

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