Short Sellers Blamed For China’s Stock Crash

chinaChinese brokerages have stopped executing short sales after officials tightened trading rules in a new attempt to shore up the country’s stock market.

Short sellers borrow and then sell shares, betting they can buy them back later at a cheaper price — and pocket the difference. Only approved brokers are allowed to engage in short selling in China.

Citic Securities, the country’s largest broker, said Tuesday that short selling had been halted so its system can “adjust” to new regulations that require investors who borrowed shares to wait one day to repay the loans. Previously, the shares could be repaid on the same day.

Officials hope the measure will force investors to think twice about betting that markets will fall.

Other brokers, including Huatai Securities, Guosen Securities, Great Wall Securities and Qilu Securities, also suspended short sales. Resumption of service will “be announced in due course,” they said.

The new regulations were issued after the market close on Monday by the Shenzhen and Shanghai stock exchanges.

Markets appeared to receive a boost as a result. The Shanghai Composite gained 3.7% on Tuesday, while the smaller Shenzhen Composite added nearly 5%.

Read more at?CNN MONEY