Official moves to clamp down on short sales intensified yesterday as the stock exchange suspended short trades in HSBC Holdings, China Telecom (Hong Kong) and Hongkong Telecom.
The unprecendented action, which undermines investors' ability to short sell almost half the Hang Seng Index, came as clearing authorities reported a backlog of unsettled trades in the wake of last week's extensive official intervention.
'The exchange considered it should take appropriate measures to prevent any systemic failures and to avoid aggravation of the settlement backlog,' a spokesman said, adding that the ban would remain in effect until further notice.
'Under these circumstances, in order to manage the settlement risk and to maintain a fair and orderly market, and not to risk further worsening the settlement cycle, the exchange has temporarily suspended the three stocks from short selling.' As authorities toughened their stance, the Hang Seng Index surged on a rush of short covering, brokers said.
The lead index ended 4.15 per cent firmer at 7,355.67 points, with gains also underpinned by Wall Street's Tuesday rebound.
HSBC Holdings accounts for 28.29 per cent of the Hang Seng Index's weighting, while Hongkong Telecom represents 11.09 per cent and China Telecom 8.45 per cent.