On the other hand, can you sell short first and then buy it back after the stock price falls, so that you can get the price difference in the middle? This is very short. Where does the short stock come from? It is definitely not the investor's, or it will be gone if it is sold. Short selling stocks is borrowed by investors from brokers. Brokers lend stocks to investors through refinancing business, so that investors can sell them first. When the stock price falls, investors buy it back at a lower price and return it to brokers, and they get the difference.
What if the stock rises instead of falling after short selling? At this time, investors still need to buy back shares and return them to brokers, so the price they buy is higher than the price they sold before, which will lead to losses.
Is there a short selling mechanism for A shares?
In fact, there is a short-selling mechanism for A shares, but it is not a short-selling mechanism in the general sense, but a partial short-selling mechanism.
First, you can short through stock index futures, which is a kind of futures. Take the stock market indexes as futures contracts, such as SSE 50, CSI 300 and CSI 500, and trade these indexes as futures contracts. When you think an index will fall, you can short it.
Second, short selling can be carried out through the securities lending business. Securities companies have financing business. Financing is to borrow money from securities companies and use stocks as collateral to buy stocks. Securities lending means lending stocks to securities companies for sale and then buying them at maturity. Not all A-share stocks can be financed by margin trading, but they need to meet certain conditions and be included in the margin trading business by securities companies.
Both methods can short A shares, the former short the index and the latter short individual stocks. However, these two businesses have a funding threshold and need more than 500,000 yuan to have this right. However, many retail investors in A shares can't even reach 6,543,800 yuan, so there is only a partial short-selling mechanism.
What impact will the overall short-selling mechanism have?
At present, A-shares are undergoing reform, including registration system reform and related system and regulations reform. In the future, the price limit may be further liberalized and even a comprehensive short-selling mechanism may be introduced.
A comprehensive short-selling mechanism, that is, all stocks can be short, regardless of the amount of funds. And all stocks can be short, regardless of performance. Only in this way can all traders be placed in a fair environment, otherwise institutions can use short selling to hedge, and retail investors can only watch their money getting less and less.
If all-round shorting is carried out, you can also make money in the decline, which may lead to the stock market falling faster in the early stage and rising more sharply when it rises. However, with the passage of time, the market rules will come into effect. When a stock keeps falling, many people will turn around and leave when they find an opportunity. When the stock continues to rise, someone will start to find the opportunity to short and start to do more.
This will make the stock price closer to its intrinsic value or fair market value, but it will make the excessive ups and downs disappear and make the market more stable.