The China Financial Futures Exchange suspended 19 accounts from short selling for a month, Reuters reported, citing people it didn’t identify.
Trading in stock-index futures remained normal, Reuters cited an exchange spokesman as saying on Friday. The exchange didn’t answer calls or an e-mailed request for comment.
The nation’s market regulators unveiled measures this week to revive stocks and pledged to investigate market manipulation as the benchmark Shanghai Composite Index plunged 29 percent from the June 12 peak to enter a bear market. Trading has been volatile with the gauge posting some of the biggest intraday swings since 1992 this week. Stock-index futures rose in Friday’s pre-market trade, while cash equities slid at the open.
“They are trying to stop people shorting futures,” said Hao Hong, China equity strategist at Bocom International Holdings Co. in Hong Kong. “If they cannot hedge they may choose to sell cash equities. And create further volatility.”
Short selling allows traders to wager on rising and falling markets and can be used as a tool to hedge their holdings. In China, it’s allowed on futures contracts linked to the CSI 300, SSE 50 and CSI 500 indexes.
China’s financial futures exchange has checked stock-index futures trading by 38 foreign institutional investors and it didn’t find “large scale” short selling activities in the market, it said in a statement Wednesday. The exchange started the investigation after a market rumor that foreign institutions including Goldman Sachs Group Inc. shorted A shares though futures, the statement said. Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, declined to comment.
The number of suspended accounts is “pretty small -- that’s not going to help the market,” Jiang Lin, an analyst at Xinhu Futures Co. in Shanghai, said by phone. “The market is still in the process of deleveraging margin debts and the index’s rise to the 5,000 level isn’t reasonable.”
The outstanding balance of margin loans on the Shanghai Stock Exchange dropped for a ninth day on Thursday, sliding to
1.29 trillion yuan ($208 billion) in the longest stretch of declines since the city’s bourse began compiling the data. A five-fold surge in borrowing had helped propel the gauge to a 150 percent advance in the 12 months through June 12.
— With assistance by Feifei Shen