2012-08-27

Expansion of short-selling comes to mainland Chinese market

No date yet, but most of the preliminary work has been completed. Here's a mention in the WSJ from last week:
China's shares ended higher Tuesday, buoyed by bargain hunting in manufacturers and alcohol companies in the wake of recent losses and growing expectations the country will soon introduce a new system for margin trading and short selling.

Local media reports said earlier this month that China will launch a trial program to expand margin trading and short-selling activities via a centralized intermediary, and reports Tuesday said the launch could come as soon as later this month. The program is aimed at giving investors access to a pool of cash and securities offered by the central intermediary--China Securities Finance Corp., which was established in October.

Brokerage firms must use their own securities and cash reserves when they participate in margin trading and short selling now.
Socionomics predicts that politicians and regulators will pass reforms well after the need is passed. New financial regulations are passed after the disaster they aimed to prevent (and often do little or nothing to prevent another crisis). Or in the case of China, they almost allowed investors to buy Hong Kong stocks right near the peak of the stock market bubble, and now they are expanding short-selling with the A-share market less than 20% away from its 2008 lows.

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