China has extended its pilot securities lending program, for short sellers and other managers, which was launched last August.
A group of 11 brokerages will be able to borrow shares in a pre-qualified pool of 90 listed “blue-chip” companies, the China Securities Journal said last week, citing information received from the state-owned China Securities Finance Corporation that services the pilot program.
The 90 stocks available for borrowing represent RMB 9.3 trillion in tradable capitalization, nearly 50 per cent of China’s A-share market.
The first phase of the pilot project was limited to allowing brokerages to borrow money, not shares, from institutional investors.Allowing brokerages to borrow shares directly will let them, in theory, tap into the massive pool of shares held passively by mainland state-owned enterprises.
Regulators will closely manage the program, the report says, quoting unnamed experts who predicted the impact of the initiative will be market neutral.
The report says the initial amount of stocks to be borrowed is likely to total around RMB 510 million.
One of the issues facing China’s nascent securities market is that the cost of borrowing is three-four times as high as it is in developed markets.