In a surprising move, China’s securities regulator has asked domestic funds to increase their short selling of stock index futures, in order to stabilize the market and prevent bubbles.
The regulator, the China Securities Regulatory Commission (CSRC), stated that short selling, which involves betting on the decline of the market, is a “healthy and necessary” practice that can help balance the supply and demand of the futures contracts and reduce the volatility of the prices.
The CSRC also claimed that short selling can help the funds hedge their risks and diversify their portfolios, and that it is not a “speculative or malicious” behavior that harms the market.
The CSRC’s request comes amid a surge in the Chinese stock market, which has gained more than 30% since the beginning of the year, driven by the economic recovery from the pandemic and the inflow of foreign capital.
However, some analysts and investors have warned that the market is overheated and overvalued, and that a correction is inevitable.
The CSRC’s request has been met with skepticism and ridicule by some market participants, who see it as a desperate and futile attempt to manipulate the market and curb the bullish sentiment.
Several have also questioned the logic and morality of the request, saying that it is contradictory and hypocritical for the regulator to encourage short selling, while cracking down on other forms of market manipulation and fraud.
“They are asking us to do something that they themselves don’t like and don’t allow. How can they expect us to trust them and follow them? This is absurd and ridiculous,” commented one fund manager, who asked to remain anonymous.
Another fund manager declared that he would not comply with the request, and that he would continue to buy and hold the futures contracts, betting on the further rise of the market.
“I don’t care what they say or what they do. I believe in the market and in the future of China. I am not a short seller. I am a long-term investor. I am a patriot,” he proclaimed.