China Will Test Short Selling, Margin Lending

From Wall Street Journal:

China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.

The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.

A broker talks on the phone at a brokerage firm in Hong Kong.
Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.

October 5, 2008 8:00 PM
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Categories: Economy