In the Chinese stock market, investors cannot place short positions on particular stocks. I think that the regulators would open the door for investors to place short positions in the future, because this is beneficial for the stock market overall.
When investors are only able to place long positions, the prices in the stock market are biased towards the investors who focus on the long side. All activities are done by the long side investors, and the investors are only able to show their short-side opinions about the stocks. However, buying and selling stocks are normal market activities and only extreme occasions would draw the market attention.
Placing a short position is a different trading move that directly shows the short-side's opinion. When placing a short position, the investors need to borrow stocks to sell, and the ones who are able to lend them stocks are usually institutions who are large long-side players. When the institutions are able to receive such orders from other investors including some institutions, they would realize the market opinion is contestable and there is a possibility of mispricing (bubble) in the market.
Therefore, if placing short positions is allowed, the market could be faster to realize the mispricing in the market.
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