CITIC Securities Restricts Short-Selling Amid Local Market Chaos
CITIC Securities Co Ltd, China’s largest brokerage, has implemented restrictions on short-selling for some clients as local stock markets continue to face significant losses, according to Bloomberg. The state-owned asset manager has stopped lending stocks to individual investors and has also raised its requirements for institutional clients, following instructions from regulators. This move comes as Chinese stock markets extend their downward trend into the new year, with little improvement in economic growth. In 2023, the blue-chip index was one of the worst-performing global indexes.
Chinese Stock Markets Continue to Plummet in 2024
Chinese stock markets are experiencing a continued decline in 2024, with signs of little improvement in economic growth. The country’s major indexes had rebounded on Thursday, after reportedly tightening rules on short-selling in October to stabilize the market. However, the rebound was short-lived, and the market has shown heavy losses for the week after weaker-than-expected data for the fourth quarter. Overall, sentiment towards China remains weak due to the absence of a widely expected post-COVID economic rebound, and recent readings indicate that the country is still struggling with deflation.
Chinese Government Limits Short-Selling to Stabilize Markets
The Chinese government has consistently attempted to limit short-selling during periods of increased stock market volatility. This strategy reflects its commitment to stabilizing the market and maintaining investor confidence. Short-selling restrictions were reportedly tightened in October to quell a market rout. By limiting short-selling, the government aims to prevent further downward pressure on stock prices and mitigate the negative effects of investor sentiment on the overall economy.
State-Owned Asset Managers Struggle to Support Falling Chinese Markets
Despite efforts from state-owned asset managers to support local markets, they may face limited headroom to do so. Fitch Ratings had downgraded the ratings of China’s big four asset managers earlier in January and put three of the four firms on watch for further downgrades. The agency cited expectations of limited government support and a worsening decline in the property market. With these challenges, state-owned asset managers may face difficulties in providing the necessary support to stabilize Chinese markets and restore investor confidence.
Beijing Faces Challenges in Boosting Economy and Investor Sentiment
Investors have called for more targeted fiscal measures from the Chinese government to support the economy and improve sentiment towards markets. However, the government has remained fairly conservative in its stimulus measures thus far. This conservative approach poses challenges for Beijing, as it faces continued economic struggles and a lack of confidence from investors. In the absence of a widely expected post-COVID economic rebound and with recent data indicating continued deflation, the Chinese government must find effective strategies to boost the economy and restore investor sentiment.
Analyst comment
1. CITIC Securities Restricts Short-Selling Amid Local Market Chaos – Negative news. Restricting short-selling shows the ongoing challenges in China’s stock markets and lack of improvement in economic growth. Market is expected to continue facing losses.
2. Chinese Stock Markets Continue to Plummet in 2024 – Negative news. Little improvement in economic growth, weaker data for Q4, and absence of a post-COVID economic rebound contribute to heavy losses. Sentiment towards China remains weak.
3. Chinese Government Limits Short-Selling to Stabilize Markets – Positive news. Government’s commitment to stabilizing the market and maintaining investor confidence. Limiting short-selling aims to prevent further downward pressure on stock prices and mitigate negative effects.
4. State-Owned Asset Managers Struggle to Support Falling Chinese Markets – Negative news. State-owned asset managers may face difficulties in providing necessary support due to limited government support and a worsening decline in the property market. Investor confidence is a challenge.
5. Beijing Faces Challenges in Boosting Economy and Investor Sentiment – Negative news. Calls for more fiscal measures to support the economy and improve investor sentiment. Conservative approach poses challenges as there is a lack of confidence and continued economic struggles. Effective strategies are needed.
