China Tightens Securities Lending Rule to Support Stock Market

(Bloomberg) — China will halt the lending of certain shares for short selling from Monday, the securities regulator announced Sunday, in a move to support the country’s slumping stock markets.

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Strategic investors won’t be allowed to lend out shares during agreed lock-up periods, the Shanghai Stock Exchange and Shenzhen Stock Exchange said in separate releases following the China Securities Regulatory Commission’s statement.

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Authorities are taking measures following an alarming slide in Chinese stocks — the MSCI China Index has lost 60% from a February 2021 peak. Last October, limits were put on the lending of shares that executives and other key employees get in strategic placements, and other curbs were imposed. Since then, the outstanding value of stocks lent by strategic investors has dropped 40%, the CSRC said Sunday.

The MSCI China gauge scored its first weekly gain of the year last week, trimming its loss for 2024 to about 7%, after the central bank announced an imminent reserve requirement ratio cut and plans for targeted stimulus.

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The CSRC also vowed Sunday to crack down on the bypassing of lock-up restrictions. From March 18, securities finance firms that borrow shares from institutional investors will have to wait one day before providing them to brokerages instead of the stock being immediately available, according to Sunday’s statement.

–With assistance from April Ma and Ken Wang.

(Added details on rules throughout.)

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