High securities borrowing costs limit China hedging options

Recent falls on China's stock markets highlight the need for hedging tools – but these remain limited

China shares
Out of stock: securities lending not widespread in China

Despite securities lending being allowed in China since a 2010 pilot programme, a lack of inventory available to borrow means the cost is high, compared with more developed markets, which is deterring investors from using this technique to hedge their single stock exposures.

China's equity markets experienced a reversal of their recent bull run with the benchmark Shanghai Composite Index plunging 13.3% between June 22 and 26 – the steepest single week decline in seven years. While investors are

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