(Yicai) Oct. 16 -- China's main securities regulator has hiked the threshold for short selling, which is expected to improve investor sentiment, according to analysts.

The China Securities Regulatory Commission raised the margin requirement to 80 percent from 50 percent so that those who borrow equity for shorting need to hold more assets as collateral, the regulator announced recently. Listed companies’ senior executives and core employees are not allowed to lend their shares to securities brokerages that can further lend them to short sellers for speculation.

The rules also mean that after a new listing, the share of a company's lent equity cannot exceed 50 percent of the total for the first five days. In a single day, such a portion can be up to 20 percent.

The market is going through a downturn and the sentiment for both buying and selling is generally at a low level, per Soochow. The fresh restrictions could stabilize the market, curb fluctuations in investor sentiment, and restore market confidence, especially after the recent incident of quantitative funds subscribing to newly issued shares and lending them to short sellers, which drew a lot of attention, it added. Even brokerages and insurance asset managers should benefit from the new rules, Soochow added.

Shenwan Hongyuan Securities listed different motives which could bolster stock prices such as the above-mentioned rule update and rebounding economic data. Moreover, Central Huijin Investment, a sovereign wealth fund in China, recently increased its shareholding in four commercial banks, including Bank of China, Agricultural Bank of China, China Construction Bank, as well as Industrial and Commercial Bank of China, which could inspire more buying.

Ping An Securities said that the positive signal could shore up the market's prosperity index. It expects more relevant policies that activate the capital market to be carried out in the future, which could make leading securities brokerages even stronger while financial information providers could directly benefit from improved prosperity, it added.

Adjustments and optimization should safeguard order and transactions in the stock markets while boosting investor confidence, Guotai Junan Securities said, adding that the latest measures encourage more funds to get involved in trading, which should in turn revitalize brokerages' performance across the board.

There are other corporate benefits too as some market insiders said that the move could make listed companies’ senior executives focus more on their main business instead of stock price speculation.

Editor: Emmi Laine