‘Malicious short selling’ used as a weapon to attack metal short sellers

“Malicious short selling”, the term invented by the Chinese securities regulator in July as it tried to stem a market rout, has become the latest catalyst stirring the mainland metal market.

Investors rushed to close their short positions in non ferrous metals on Thursday, which pushed the price of nickel up by more than 8 per cent in Shanghai during the afternoon, after Chinese and international media reported that the mainland regulators were considering a request from an industry group to investigate short selling in domestic metal contracts amid recent price declines.

But industry insiders said some metal traders were making use of the term “malicious short selling” to attack short sellers, and the surge in prices would soon lose momentum.

The Chinese news app wallstreetcn.com on Thursday identified Jinchuan Mining, the nation’s top nickel producer and third-biggest copper producer by capacity, as the industry player that complained to the State Council and the China Securities Regulatory Commission about “malicious short selling”, saying it had caused losses of 10 billion yuan.

However, a manager at Jinchuan Mining told the South China Morning Post on Thursday the report was “utterly a rumour”.

“It is totally amateur to make such a charge as ‘malicious short selling’. Jinchuan itself holds short positions. Short selling is a totally normal market practice,” he said.

“Some people are using our name, and the authorities’ names to attack the short sellers on the market.”