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Maybe it's a minor point among everything else, but I don't see why it's necessary that foreign investors in particular be able to short Chinese banks. It seems
by andrewflnr 8mo ago
Maybe it's a minor point among everything else, but I don't see why it's necessary that foreign investors in particular be able to short Chinese banks. It seems like if Chinese investors were allowed to short them then you would still get price discovery and at least any politically-sensitive "profits from bank failure" would stay in the country.
- logicchains 8mo agoThere's no way for foreign investors to have confidence that local investors were allowed to short them, even if it was technically legal, because the government is known for applying extralegal pressure on local firms to go long.
- andrewflnr 8mo agoI mean, they can just see if the prices look like the kind of thing they would want to short if they were allowed. But that really just relates to the overall political impossibility of it.
- dmurray 8mo agoAnd while it might sound like government intervention incompatible with a market economy, short selling of banks has been prohibited in Spain, Italy and the US at various times in the last 20 years. Only in downturns as an "emergency response", but that's when people want to short sell them and when they are most likely to be overpriced.