Foreign investors, reluctant to go long mainland Chinese stocks under a new Shanghai-Hong Kong investment plan, don’t appear any more eager to short them.
After a plan to boost foreign investment in mainland Chinese stocks failed to garner the interest authorities had hoped for, a move to allow them to short Chinese stocks failed to attract even one short sale on the first day it took effect.
Chinese authorities allowed foreigners to short-sell mainland stocks under the Stock Connect link-up between the exchanges of Hong Kong and Shanghai for the first time on Monday. The decision to allow short-selling came after the Stock Connect program, launched last November, attracted less interest than anticipated.
Under the short-selling regulation, foreign investors are allowed to short a combined total of up to 1 percent of a company’s shares on any given day, or up to 5 percent over any 10-day period, starting March 2. Foreigners can only short-sell stock included in the Shanghai-Hong Kong link.
Trading via Stock Connect, which allows Hong Kong retail investors and foreign institutional investors to trade mainland stocks directly through Hong Kong’s exchange, has totaled less than a third of the government-fixed allotment for foreign investors of 300 bn yuan ($48 bn).
Analysts have said glitches that caused some trading delays, cumbersome bureaucracy and the existence of alternative means of investing in mainland Chinese stocks are at least partly to blame for the slow trading through Stock Connect.
Short-selling may have been further discouraged by sharp gains in Chinese stocks following loosening of central bank monetary policy in recent months. The day before short-selling was allowed, the People’s Bank of China announced it had lowered its key interest rates by 25 basis points in an attempt to stimulate economic growth.
