China to Start Margin Trading for Securities Firms

By Stan James

Oct. 5 (Bloomberg) -- China will soon start margin trading and short selling among securities companies, the China Securities Regulatory Commission said in a statement on its Web site today.

The regulator will allow investors to sell shares that they don't already own to create ``an internal price stability'' within the local markets, the CSRC statement said.

China's plan contrasts with regulators in the U.S., Europe and Australia that have banned short selling to shore up financial shares battered by the global credit squeeze. China's government is betting the changes will boost trading without spurring further declines after state share buybacks helped the CSI 300 Index rebound from a two-year low last month.

China Investment Corp., the nation's $200 billion sovereign wealth fund, bought shares in Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp., the nation's three largest state-owned banks, last month, after the CSI 300 had fallen 58 percent this year.

To contact the reporter on this story: Stan James in Hong Kong at Sjames2@bloomberg.net