Chinese shares open mixed as regulation tightens on short selling

The volatility prompted the government to unleash a wave of measures to stabilize markets.

The Citadel statement did not say why the Shenzhen-based trading account had been suspended, but a source familiar with the matter said the China Securities Regulatory Commission (CSRC) was looking at its role in causing market volatility, in particular the number of its cancelled transactions. A CSRC spokesperson told state-owned media that some individual and institutional accounts had made “abnormal” buying and selling orders on blue chips like PetroChina and Sinopec – these stocks saw especially heavy sales, the regulator claimed, saying such trading had disturbed the market order and misled investors.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, soared 4.76 per cent, or 97.83 points, to 2,150.95 on turnover of 442.4 billion yuan.

CITIC slightly retreated 0.10 per cent to $HK20.55 and Huatai Securities was down 0.28 per cent to $HK15.92 in Hong Kong.

Immediately afterward, several of the country’s leading brokerages, including Citic Securities, that they would temporarily suspend short selling to comply with the rule changes and to control risks, reported the South China Morning Post. The state-affiliated Shanghai Securities News wrote (link in Chinese), “Never let the bailout [meaning, the government’s all-out stock market rescue package] become the cash machine for those malicious program traders”.

Chinese regulators have suspended a trading account related to Citadel Securities, owner of hedge fund Citadel, as China takes further steps to rein in speculators in an effort to bolster flagging stock markets.

Japanese oil company Inpex lost 1.63% and construction manufacturer Komatsu declined 2.34%.

Amid the market turmoil, some foreign investors see an opportunity to buy, believing confidence will eventually return and private Chinese investors will come back to the market.

The Hang Seng index dropped 0.1 percent, to 24,378.83 points. Japan Airlines gained 1.8 percent after reporting quarterly profit that more than doubled from a year earlier.

“It’s an unconventional strategy that’s used in a hard time”, Wu said. U.S. crude has been sliding since reaching a high this year of $61.43 a barrel on June 10.

August’s first full day of trading showed no let-up in July’s major themes – oil led commodities lower, currencies of resource-rich countries fell, Chinese stocks slid on economic concerns and European equities rose on earnings. That data also hurt industrial metals like copper and aluminum, which have fallen to six-year lows. On Wall Street, shares of Exxon Mobil and Chevron, the two largest publicly traded energy companies, fell roughly 5 percent each on Friday.

Investors were also unsettled by reports that the CSFC had started to return funds it borrowed from commercial banks to stabilise the stock market ahead of schedule, sparking fears that Beijing’s commitment to the market may be flagging.