Beijing - China's two stock exchanges have announced new rules that effectively restrict short-selling, a practice already at the centre of a regulatory and law enforcement investigation after a market rout.
The Shanghai and Shenzhen exchanges said in separate statements late on Monday that investors who borrow shares must wait until the next day to pay back the loans, instead of settling the same day as under previous rules.
The statements do not directly mention short-selling - essentially a bet that the price of a stock will fall. But short-selling requires investors to borrow the stocks they do not own to carry out the deal, before buying them back at what they hope will be a lower price.
By obliging short-sellers to maintain their position overnight the new rules expose them to greater risk.
“This new rule should discourage speculative short sellers - day traders - and help mitigate intraday volatility,” Xian Liang, a portfolio manager at US Global Investors, told Bloomberg News.
The Shanghai exchange statement said the move aimed to improve risk management and protect market order.
The bourse said separately that it had suspended four more stock trading accounts for “abnormal” transactions. State media reported the move brings the number of restricted accounts on the two exchanges to at least 38.
The China Securities Regulatory Commission (CSRC) has already announced it is probing “malicious” short-selling, along with police.
After the Shanghai market crashed 30 percent from its peak in mid-June, the government launched a broad intervention to stem the rout, with measures including banning major shareholders from selling and funding a state-backed firm to buy stocks.
AFP