Move follows latest efforts to curb manipulation
Several Chinese brokerages suspended their short-selling services on Tuesday, following moves by the country's authorities to step up efforts to stabilize mainland stock markets.
CITIC Securities, one of China's largest brokerages, said in a statement on Tuesday that in order to comply with urgent changes in exchanges' margin trading and short-selling rules and also to curb business risks, the company would immediately call a halt to its short-selling business.
The brokerage was joined by four of its rivals - Huatai Securities, Guoxin Securities, Great Wall Securities and Qilu Securities - which all posted similar announcements on their websites on Tuesday.
The moves followed the latest rule changes rolled out by the two bourses in Shanghai and Shenzhen late on Monday. Both the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange issued separate statements on their websites Monday evening, introducing rule changes for short selling that prevent investors from borrowing shares from brokers and returning them within the same day.
The new rule aims to make it more difficult for investors to conduct high-frequency short-selling operations, news portal xinhuanet.com reported Tuesday, citing an unnamed official from the SSE.
As of Monday, the total outstanding value of margin trading and short selling in the mainland markets amounted to 1.3 trillion yuan ($209.43 billion), with short selling accounting for just 0.23 percent of the total, data from both exchanges showed.
Some other brokerages such as Guotai Junan Securities and Changjiang Securities had already halted their short-selling services in early July amid the efforts to stabilize the markets at that time, according to media reports.
"Given the recent sluggish market performance, it is understandable for securities regulators to continue rolling out support measures," Yu Pingkang, chief macroeconomic analyst at Huatai Securities, told the Global Times on Tuesday.
According to Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, a crackdown on malicious short selling and price manipulation has become the latest focus of the official efforts to stabilize the market.
The official China Securities Journal reported on Monday that the China Securities Regulatory Commission (CSRC) will strengthen its supervision of program trading, which is sometimes used to manipulate the markets and could trigger systemic risks.
Meanwhile, information from both exchanges showed that so far 38 stock accounts have had their trading rights suspended for three months due to suspicious trading behavior, such as abnormally frequent bids and bid cancellations that may have affected securities prices.
Following the latest series of government measures, mainland stock markets registered a rebound on Tuesday, with the benchmark Shanghai Composite Index surging 3.69 percent or 133.63 points to close at 3,756.54 points.
But experts said it's hard to tell when the market will return to normal, partly because of the continuous issuance of new measures to minimize price volatility and stabilize stock prices.
At normal times, leverage, short selling and program trading are all valid tools for stock trading, while in the event of wild market swings, it is necessary for regulators to take some measures to restrict the use of these tools, Hu Yuyue, a securities professor with Beijing Technology and Business University, said on Tuesday in an interview with the China Business Network.
But it could also delay a return to normal for the markets, he noted.
"Currently, the key question for the market is when these government support measures will come to an end," Dong told the Global Times on Tuesday. "It is actually improper for regulators to issue supportive measures continuously."
"While such measures may temporarily stop the markets from falling, they cannot support stock prices forever. Overvalued shares should go down to reasonable levels, and government policies cannot change that market rule," Dong said.
According to Yu from Huatai Securities, regulatory guidance could remain until the stock markets are seen to have stabilized properly and some positive factors such as a recovering economy emerge.
