By Matthew Kerkhoff
Today’s sell-off is global in nature, with most major indexes around the world lower. It seems a few catalysts are working in concert to drive markets into the red.
Beginning with China, the China Securities Regulatory Commission issued warnings about the massive moves in their stock markets, urging investors not to buy on margin or liquidate property to invest in stocks. They backed this up by adding limits on margin trading for smaller, over-the-counter (non-exchange traded) stocks. Margin account balances in China are currently at record levels.
In addition, the Shanghai and Shenzhen stock exchanges are taking steps to facilitate shorting (betting against) stocks, by increasing the available supply of stocks which can be borrowed and sold short.
Both these steps, suppressing margin buying and facilitating increased shorting, are causing investors to wonder if China’s market, which has doubled over the past twelve months, may be in for a pause or correction. ... Log in or subscribe to continue reading.