BTD: China Expands Short-Selling, Curbs Trust Financing of Equities

Here's your chance to jump into the hottest casino game on planet Earth.
China Futures Tumble on Trust Curbs, Expansion of Short Selling
FTSE China A50 Index futures for April delivery tumbled 5.2 percent in Singapore at 7:43 p.m. local time, while contracts on the Hang Seng China Enterprises Index lost 3.9 percent. Regulators banned the margin-trading businesses of brokerages from using so-called umbrella trusts and allowed fund managers to lend shares to short sellers, statements on Friday showed.

Investors have used umbrella trusts, which allow for more leverage than brokerage financing, to ramp up wagers on Chinese stocks after monetary stimulus sparked a world-beating rally in the nation's benchmark equity gauge. Permitting mutual funds to lend their holdings to short sellers would make it easier for bearish traders to bet on a retreat after the Shanghai Composite Index closed at a seven-year high on Friday.
These are good policy changes, but they will slow stocks for a day or two. China's regulators err on the side of caution and prudence when shifting regulations, a good thing nearly all of the time. When it comes to an emotionally driven bull market though, there's nothing that can stop it except a change in emotion.

If you're up for a wild trade and understand the risk, absolutely buy the dip——but use money that would otherwise go towards lottery tickets.

While short selling on the Shanghai bourse climbed more than threefold in the past nine months and reached a record 7.46 billion yuan last week, the amount still pales in comparison to China’s $7.3 trillion market capitalization. The CSRC said Friday it also expanded the number of stocks available for short selling to 1,100.
It'll be some time before the shorts are a factor in the market.

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