China looks to halt short-selling as markets reopen after Lunar New Year holidays

The central bank will inject 1.2 trillion yuan worth of liquidity into money markets on Monday

A man wearing a mask walks through a square near a slogan of communist ideology outside the South Railway Station in Shanghai, China, on Sunday, Feb. 2, 2020. Chinese policymakers prepared to shore up the financial system and capital markets, which are bracing for a sell-off on Monday when markets re-open. Photographer: Qilai Shen/Bloomberg
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China has taken steps to limit short-selling activities as the country's financial markets prepare to reopen on Monday amid an outbreak of a new coronavirus, three sources with direct knowledge of the matter told Reuters.

The sources said China Securities Regulatory Commission had issued a verbal directive to brokerages, including Citic Securities and China International Capital, to bar their clients from selling borrowed stocks on February 3.

It was not clear if the suspension – which was first reported on Sunday by Chinese media outlet 21st Century Business Herald – would be extended beyond Monday, one of the sources said.

In an internal memo sent to its branches, Citic called the move a "political task" aimed at helping to stabilise the market on the first trading day of the stock market in the Lunar New Year of Rat as the coronavirus outbreak unsettles global markets.

Investors are bracing for a volatile session in Chinese markets when onshore trades resume on Monday after a break for the Lunar New Year that was extended by the government.

China's policymakers have taken various measures to protect the financial system from the fallout due to the outbreak.

The central bank said it will inject 1.2 trillion yuan (Dh635 billion) worth of liquidity into the markets via reverse repo operations on Monday.

The CSRC is also considering launching hedging tools for the A-share market to help alleviate market panic and will suspend evening sessions of futures trading starting from Monday, it said.