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Similar to the restrictions US regulators instituted during the 2008 financial crisis, China has placed restrictions on short selling. Investors in China now have to wait at least one day to cover their short. China believes this will lessen the volatility in the market-----but if the US financial stocks in 2008 are any example, this strategy may not be effective. It may prove to be tougher than the Chinese government thinks to curb the recent market volatility.
Under the old T+0 rule, “you can go short in the morning and cover your shorts before market close the same day and lock in your profit, if your bet is right,” Xian Liang, a San Antonio, Texas-based portfolio manager at U.S. Global Investors Inc., said in an e-mail. “Now with T+1, you can’t cover your short position in the same day, and have to wait till next day at the earliest. This new rule should discourage speculative short sellers -- day traders -- and help mitigate intraday volatility.” China is taking unprecedented measures to stem a stock rout that has wiped out almost $4 trillion in market value since mid-June. Earlier on Monday, the Shanghai Stock Exchange warned two trading accounts for making a “large amount of sell orders affecting security prices or volume.”
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