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Friday, September 26, 2008

China to allow Shorting of securities, while USA continues to ban it

When you hear "capitalist", USA is a name that comes to mind.
And in capitalism structure, you are normally allowed to invest (who are we kidding, place bets) on any company or financial instrument in any direction. That is (until recently) the concept behind freedom and capitalism.

America has widely banned short selling (notice they didn't ban purchasing when the market soared too high), and as I have blogged before, China that doesn't allow short selling had their stock market crushed.

Now China is going to allow short selling for the first time in the history of their country. Why? To help balance the markets. As their market has gotten crushed (65% in a year), they have realized a one sided bet, isn't a bet. Its either all up or all down. You need counter-betting to stabilize the markets.

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