Hong Kong stocks rally after China unveils fresh curbs on short-selling to boost confidence
- The China Securities Regulatory Commission (CSRC) raised the margin ratio for short selling and pledged greater scrutiny of quant-based investments.
The Hang Seng Index rose 2.1 per cent to 17,832.33 at the close, the steepest gain since June 19. The Hang Seng Tech Index jumped 2.7 per cent and the Shanghai Composite Index added 1.1 per cent.
All but seven stocks on the 82-member benchmark rose, with Li Auto jumping 7 per cent to HK$82.50 and auto dealer Zhongsheng Group Holdings advancing 6.3 per cent to HK$12.56.
“This triggers a domino effect in the short term: existing short positions get squeezed, and new short-selling activities hit a roadblock,” said Stephen Innes, managing director at SPI Asset Management. “As a result, markets often rally, especially in heavily shorted stocks. It’s like a temporary balm that soothes the nerves, but heavy-handed interventions can spook investors and suck the life out of trading volumes.”
The margin deposit ratio will rise to 100 per cent of the values of borrowed stocks for short sellers starting Friday, compared with 80 per cent currently, according to the CSRC statement. The ratio for hedge funds will increase to 120 per cent from 100 per cent now, it said.