Chart of the Day: China Stock Short Selling Hits Record High

Chinese short sellers have been increasingly active over the last few months amid grim market conditions, pushing the balance of securities lending on domestic exchanges to a record high of over 20 billion yuan ($2.8 billion) on Thursday.

In general, securities lending is a practice in which investors borrow shares from a brokerage and then sell them in hope that the share price will fall in the future. If that happens, the investors can rebuy the stock at a discount, return the borrowed shares and profit from the difference.

The balance of securities lending rose to 20.4 billion yuan on Thursday, breaking the 20 billion yuan mark for the first time, according to data from the Shanghai and Shenzhen stock exchanges. The number inched down to slightly over 20 billion yuan the next day.

Cao Haifeng, an analyst at UBS Securities Co. Ltd., said in a note that the rise has been driven largely by securities lending on Shanghai’s Nasdaq-style, tech-oriented STAR Market launched last year.

A brokerage source told Caixin that although securities lending is relatively easier on the STAR Market than on the main boards, stocks available for lending are still in short supply.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Gavin Cross (gavincross@caixin.com)

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