Chinese regulators are continuing to roll out rescue measures to stem
a 30% decline in equities since mid-June.
On Tuesday the Shanghai Composite Index added 3.7% to 3,756.54, and the smaller Shenzhen Composite Index is higher 4.8% at 2,250.23. The small-cap ChiNext index rose 6.1%.
A day earlier, the Shanghai and Shenzhen stock exchanges announced revised rules on short selling aimed at curbing volatility.
Short sellers now have to wait at least one day to cover their positions and pay back loans used to buy shares. Before these measures, investors could cover their positions within the same day, a practice regulators said added to “abnormal volatility of stock prices.”
"The market is still very volatile
... investors are likely to be quiet and see what the next step of the
government will be," said Patrick Yiu, a director of CASH Asset
Management in Hong Kong. "The overall market momentum is not likely to pick up anytime soon and the economy in China is still very weak," he added.
Short selling allows investors to sell borrowed shares on hopes
they can buy them back at a much lower price later on, pocketing the
difference.
According to Wind Information Co, it is still a small portion of China’s debt-fueled stock investing, or margin loans, compiling just 3.48 billion yuan ($560.28 million) as of Monday, compared with 1.29 trillion yuan of margin-financing loans.
Short-selling levels have dropped from record 10.31 billion yuan on April 9, though they have climbed from a recent trough of 1.90 billion yuan at the end of January 2014. The limited scale means revised rules aren’t likely to have a big impact on market swings, said Li Lei, an analyst at China Minzu Securities.
Nevertheless, analysts suggest officials’ moves could help buoy investor sentiment.
“Short selling has been a concern by many retail investors and they are likely to see this development as a net positive for the market,” said Gerry Alfonso, director of trading at Shenwan Hongyuan Securities.
