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Stock re-lending scheme to stimulate short selling
By Ye Zhen |
February 28, 2013, Thursday
|
Print Edition
Print Edition
CHINA will begin a securities re-lending program today to allow qualified brokerages to borrow stocks for short selling as part of moves to diversify the domestic capital market.
The first group of 11 securities companies can borrow shares in a pool of 90 pre-approved companies and re-lend the borrowed stocks to their clients, according to the China Securities Finance Corp, a state-owned intermediary body that facilitates the program.
The 90 stocks, selected from a pool of 500 underlying securities, are worth of 9.3 trillion yuan (US$1.49 trillion) by market capitalization, accounting for about 50 percent of China's A-share market.
Selected brokerages can borrow stocks for fixed periods ranging from three days to 182 days at lending rates of 1.5 percent for the three-day term and up to 3.5 percent for the 182-day term.
Previously, securities brokerages were limited to borrowing cash for margin trading when the pilot re-lending business was unveiled in late August.
Analysts see the impact of the expanded short selling on the market as limited.
"The selling pressure on the market is still small as the numbers of both qualified brokerages and stocks to be borrowed are limited," said Liu Jing, analyst with Shenyin and Wanguo Securities. "Meanwhile, the current historical-low valuation of the A-share market and a warmer market sentiment will also reduce the downside pressure on the market."
Also yesterday, the China Securities Regulatory Commission said in a statement that it will revoke the securities business permit of Shen Zhen Pengcheng Certified Public Accountants Co, which failed to reveal the fraudulent securities issuance and profit manipulation by Yunnan Green-Land Biological Technology Co, which was fined 10.4 million yuan on February 7.
The first group of 11 securities companies can borrow shares in a pool of 90 pre-approved companies and re-lend the borrowed stocks to their clients, according to the China Securities Finance Corp, a state-owned intermediary body that facilitates the program.
The 90 stocks, selected from a pool of 500 underlying securities, are worth of 9.3 trillion yuan (US$1.49 trillion) by market capitalization, accounting for about 50 percent of China's A-share market.
Selected brokerages can borrow stocks for fixed periods ranging from three days to 182 days at lending rates of 1.5 percent for the three-day term and up to 3.5 percent for the 182-day term.
Previously, securities brokerages were limited to borrowing cash for margin trading when the pilot re-lending business was unveiled in late August.
Analysts see the impact of the expanded short selling on the market as limited.
"The selling pressure on the market is still small as the numbers of both qualified brokerages and stocks to be borrowed are limited," said Liu Jing, analyst with Shenyin and Wanguo Securities. "Meanwhile, the current historical-low valuation of the A-share market and a warmer market sentiment will also reduce the downside pressure on the market."
Also yesterday, the China Securities Regulatory Commission said in a statement that it will revoke the securities business permit of Shen Zhen Pengcheng Certified Public Accountants Co, which failed to reveal the fraudulent securities issuance and profit manipulation by Yunnan Green-Land Biological Technology Co, which was fined 10.4 million yuan on February 7.
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