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China tells hedge funds to cut short selling of stock index futures

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China’s securities regulators have asked a number of hedge fund managers to restrict short selling of stock index futures as part of wider plans to stabilise the country’s declining markets, according to a report by Reuters.

The report cites two unnamed sources as confirming the request which came as the blue-chip CSI300 Index fell to near five-year lows this week, prompting the Chinese government to promise to steady capital markets.

According to one hedge fund manager, he received calls from China Financial Futures Exchange, which is regulated by the China Securities Regulatory Commission, cautioning against reckless short selling, especially ‘naked’ short selling that is not conducted for hedging purposes.

Another hedge fund source meanwhile said the exchange had informally asked his firm recently not to engage in short selling for speculative purposes.

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