China tightens regulations on securities financing

China’s securities regulator said on Sunday that the nation would stop lending certain shares for short sales as starting Monday in an effort to stabilize its collapsing stock markets.

Following the announcement from the China Securities Regulatory Commission (CSRC), the Shanghai and Shenzhen stock exchanges said that strategic investors would not be permitted to lend out shares during prearranged lock-up periods.
Following a catastrophic decline in Chinese stocks—the MSCI China Index has dropped 60% from its top in February 2021—authorities are taking action. In October of last year, more restraints and restrictions were placed on the lending of shares obtained via strategic placements by CEOs and other important staff members. The CSRC reported on Sunday that since then, the outstanding value of the equities loaned by strategic investors has decreased by 40%.
Following the central bank’s announcement last week of an impending reduction in the reserve requirement ratio and plans for targeted stimulus, the MSCI China gauge had its first weekly gain of the year, reducing its loss for 2024 to almost 7%.