China to Expand Short-Selling Program as Part of Reform
Eleven brokerages will be able to borrow shares in a pre- approved pool of 90 publicly traded companies, according to the report, which cited China Securities Finance Corp. The state- owned agency was set up to provide securities firms with funds and stock for short-selling and margin trading.
The expansion of short-selling -- in which investors sell borrowed shares in the expectation of profiting when they fall - - will increase the efficiency of China’s equity market, help manage risks and boost brokers’ revenue, the report said.
The brokerages in the trial program are: Citic Securities (600030) Co., the biggest listed broker; Everbright Securities Co.; GF Securities Co.; Guotai Junan Securities Co.; Guosen Securities Co.; Haitong Securities (600837) Co.; Huatai Securities Co.; Shenyin & Wanguo Securities Co.; China Merchants Securities Co.; Galaxy Securities Co.; and China Securities Co.
These firms will be allowed to borrow shares from CSFC and re-lend to customers. The pre-approved pool of securities comprises 50 companies listed in Shanghai and 40 in Shenzhen, with a total market capitalization of 9.3 trillion yuan ($1.49 trillion), according to the report.
Brokerages will be able to borrow shares from CSFC for fixed periods -- 3, 7, 14, 28 and 182 days -- at different rates, the report said.
The expanded program “will not necessarily add to the selling pressure and suppress the equity market” because more brokers are participating in the margin-trading program, which allows investors to borrow money from brokers to buy shares, according to the report.
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