Beijing tightens securities lending rule to support stock market


China will halt the lending of certain shares for short selling from Monday, the securities regulator announced, in a move to support the country’s slumping stock markets.
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.
“The move may have limited impact in terms of stabilising the market” as some estimates show that such security lending balance is of insignificant size, said Willer Chen, senior analyst at Forsyth Barr Asia Ltd. “Still, this is a good gesture as market participants had been calling for regulators to step in on this front.”
While the bourses didn’t define strategic investors, it typically refers to holders with restricted shares. As of January 25, the balance of A-share securities lending was 70.5 billion yuan ($9.8 billion), a 13% decrease from the end of September 2023, according to Ping An Securities Co, citing Wind data. An equity gauge of onshore Chinese brokers underperformed Monday, falling more than 1%. The broader CSI 300 benchmark slipped 0.2%.
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. 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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