An investor holds watches a board showing stock prices (red for gains). Photo: Reuters

China’s securities regulator urged brokerages to ask investors not to close out positions in the event of significant share price drops, but instead to add to collateral, Bloomberg reported on Monday, citing unnamed sources.

Stocks traded in mainland China managed to weather a two-day global selloff, with the Shanghai Composite rising 0.73% on Monday. Despite the rise in mainland-traded A-shares, H-shares showed modest losses.

As we wrote earlier today, one explanation for the resilience is simply the fact that Chinese stocks are still trading at a significant discount. The forward-looking price earnings ratio of Hong Kong-traded H-shares is less than half that of the S&P 500.

Another thing not to be overlooked is that China is entering its Spring Festival hibernation, when trading volumes drop off markedly ahead of a week-long close. The official holiday will begin Thursday of next week and run through the following Wednesday.

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