Hong Kong Exchanges and Clearing (HKEx) has said that securities borrowing and lending for covered short sales in the Shanghai-Hong Kong Stock Connect will begin on 2 March.
These new rules will only apply for Northbound Stock Connect users – in other words the Shanghai-listed A shares that are accessible to outside investors through the Stock Connect. That equals 568 stocks (of the 950 stocks in total that are quoted in Shanghai). It is not entirely clear yet if the entire set will be shortable.
Neither QFII nor RQFII holders will share the same ability to short shares in Shanghai. Before short selling on the Stock Connect, investors have to borrow stocks in the usual way for such transactions.
An additional restriction is that the shares sold short using this method will be capped at 1 per cent of the total amount of that stock held by Hong Kong investors.
On the last trading day before Chinese New Year, Northbound turnover was RMB 2.67 billion – representing just one per cent of total Shanghai volumes.