China blames short sellers, foreigners for stock-market rout

Shanghai

RUMOUR-SPREADING short sellers and foreign investors with a hidden agenda. If you believe China's state-run media, those are some of the key culprits for a stock-market rout that erased US$3.2 trillion of value in three weeks - or almost US$1 million for each minute of trading - on mainland exchanges. The underlying message, that market manipulation is fuelling the selloff, was reinforced by securities regulators last week as they pledged to crack down on "vicious" short selling.

The problem with that narrative, though, is that the numbers tell a different story. Short positions on the Shanghai Stock Exchange totalled just 1.95 billion yuan (S$424 million) on Thursday, or less than 0.03 per cent of the country's market capitalisation, as bears closed out more than half their bets since June 12. Foreign money managers own fewer than 3 per cent of Chinese shares, and they've been adding to holdings in Shanghai as prices tumble.