Hong Kong stocks might be able to rise to 16,600 points in the short term, with China's securities regulator suspending lending of restricted shares from today to limit short-selling.
But some analysts warned that the market may have not have hit the bottom in the longer perspective with worries about China's economic slowdown and the US presidential elections ahead.
Yesterday, the China Securities Regulatory Commission said that it will suspend lending of restricted shares effective today, in the latest attempt by policymakers to stabilise the country's stock markets following recent sharp falls.
Restricted shares are often offered to company employees or investors with certain limits on their sale, but they can be lent to others for trading purposes, such as short-selling, which can add pressure on markets during a prolonged slump.
The move will "highlight fairness and reasonableness, reduce the efficiency of securities lending, and restrict the advantages of institutions in the use of information and tools, giving all types of investors more time to digest market information and creating a fairer market order," the regulator said in a statement.
The CSRC added it would "resolutely" crackdown on illegal activities that use securities lending to reduce holdings and cash out.
The regulator also said it will limit the efficiency of some securities lending in the securities refinancing market from March 18.
Kenny Ng Lai-yin, securities strategist at Everbright Securities International, said the series of new measures show Beijing's determination to boost the stock market.
But Ng warns that Hong Kong's Hang Seng Index might continue retreating this week after a rise last week, as investors need time to digest the new policies.
He projected the benchmark index could rebound to the 16,600-point level, around 4 percent higher than its 15,952-point close last Friday.
However, Morgan Stanley still slashed its year-end target for HSI to 16,000 points, 13.5 percent lower than its goal of 18,500 by the end of June, citing concerns about local government debt, an ageing population and deflationary pressures in China.
Redmond Wong Wing-fai, Saxo Bank's Greater China market strategist, agrees that the HSI might fall further and thinks that the chances of entering a bull market are low in the long run, pointing out that Sino-US ties could be threatened by the upcoming US presidential elections in November.
The CSRC said it would resolutely crack down on lending of restricted stocks . Xinhua
