China’s securities regulator moved to soothe investors, after a social media post hyped up a spike in shorted stocks last week, its second attempt this month to talk up the market just as a rebound shows some signs of fizzling out.
The post, which was not identified, only played up the data on the new shorted stocks while overlooking the figures of the stocks whose short positions were closed out due to their removal from stock gauges after the review, the watchdog said.
The outstanding number of shorted stocks dropped by 460 million on June 11 and 12, with an equivalent decrease in value by 5.4 billion yuan (US$744.3 million), the CSRC said.
“Going forward, the CSRC will fully evaluate and fine-tune the rules on short selling and strengthen the counter-cycle adjustment,” the watchdog said. “At the same time, we will step up oversight and severely punish irregularities, such as illegal stake reductions by big shareholders taking advantage of short selling.”
The crackdown on short-selling is part of a slew of measures unveiled by the CSRC over the past year to arrest a three-year market decline. The regulator has banned brokerages from lending stocks to short sellers that are borrowed from institutional investors and prohibited shorting of stocks that are still in the lock-up period.
“These rules are still being strictly implemented and there are no changes to that,” the CSRC said in the statement.
The outstanding value of the shorted stocks on the mainland’s exchanges totalled 33.6 billion yuan on Friday, the lowest in four years, according to Bloomberg data. The value has fallen 81 per cent from its peak of 173.7 billion yuan on September 10, 2021, the data showed.
China’s stock markets have stabilised this year after a flurry of regulatory interventions, including state buying and curbs on quantitative investment strategies. Beijing also replaced the head of the CSRC in February, appointing Wu Qing, a veteran stock-market regulator known for his tough approach.