Share

China stocks sink amid leverage crackdown

Hong Kong - A selloff in Chinese stocks deepened, with the benchmark gauge slumping the most in three months, amid concern authorities will step up measures to crack down on leveraged trading.

The Shanghai Composite Index fell as much as 1.9%, the biggest intraday loss since January 16, before paring declines to 1.8% as of 07:09. Industrial companies and material producers led losses. The ChiNext small-cap gauge headed for its lowest close since September 2015.

China’s authorities are taking advantage of a strengthening economy to reduce financial-system risk by tightening the screws on leverage.

The banking regulator said late on Friday it will strengthen a crackdown on irregularities in the financial sector, echoing comments by the securities watchdog just days earlier, while the top insurance official is being investigated on suspicion of “severe” disciplinary violations.

The Shanghai Composite has slumped 5% since closing at a 15-month high on April 11, the biggest loss among global gauges.

"Market sentiment has been damped by recent tightening supervision on all fronts such as the banking commission, insurance commission, securities regulator," said Ben Kwong, executive director of KGI Asia in Hong Kong. "They expressed concern about bubbles and credit defaults. The deleveraging process is still in progress."

The declines weighed on stocks in Hong Kong, overshadowing results in the French elections. The Hang Seng Index dipped 0.1%, while the Hang Seng China Enterprises Index erased an advance of 1.1%.

China is likely to take more deleveraging measures, Financial News said in a front-page commentary. The banking regulator has ordered local units to assess cross-guaranteed loans, according to a Caixin report.

Traders will be watching to see whether the Shanghai gauge pares losses to less than 1% by the close, as has been the pattern recently. The index has gone more than 80 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992.

"Investors had expected officials to give some kind of signal to soothe the market after the big falls earlier last week, but their hope came to naught, with regulators saying over the weekend that they want to continue tightening,” said Chen Yalong, an analyst in Shanghai at Northeast Securities.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.02
-0.6%
Rand - Pound
24.00
-0.4%
Rand - Euro
20.53
-0.3%
Rand - Aus dollar
12.35
-0.0%
Rand - Yen
0.13
-0.6%
Platinum
901.20
+0.5%
Palladium
997.97
-0.4%
Gold
2,210.69
+0.7%
Silver
24.71
+0.3%
Brent Crude
86.09
-0.2%
Top 40
68,075
+0.6%
All Share
74,269
+0.5%
Resource 10
56,834
+2.1%
Industrial 25
103,553
+0.3%
Financial 15
16,490
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders