Short selling A shares flat in link
Print Edition
SHORT selling of A shares under the Shanghai-Hong Kong Stock Connect, allowed for the first time, got off to a flat start yesterday, with one analyst citing restrictions imposed by the Hong Kong exchange.
Hong Kong launched the short-selling scheme yesterday, and by the market close, there were no short selling of Shanghai-listed shares, data from the Hong Kong exchange showed.
The Hong Kong bourse allows international investors to short sell 414 Shanghai-listed shares, or 72.9 percent of the capitalization of the designated A shares under the link, to offer traders more hedging tools.
The cold response, however, was in line with market expectations as a number of curbs were put in place to prevent instability in the A-share market.
For each eligible stock, a short position is subject to a daily cap of 1 percent of foreign holdings through the link and a cumulative limit of 5 percent over 10 straight trading days. The input price of a short-selling order must not be below the most recent execution price of the share, the Hong Kong exchange clarified.
Meanwhile, the Shanghai exchange may suspend short selling of a stock when the total open short positions in that stock hit 25 percent of its total free-float shares. The short selling will resume only when the total open short position drops below 20 percent.
“With those restrictions, short-selling trading is expected to be tepid in the early stage,” said Terence Ho, Ernst & Young’s IPO leader for China.
But Ho noted that some shares with poor fundamentals may be target of short sellers.
A shares with a high premium over their Hong Kong-listed counterparts will also likely be pursued by short sellers, according to analysts.
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