Share

China ups backing for margin trading

Shanghai - Chinese authorities on Monday boosted support for margin trading, which fuelled a stunning stock market rally before government restrictions triggered a spectacular rout last year.

Margin trading, through which investors only need to deposit a small proportion of the value of their trades, potentially generates bigger profits but also exposes them to bigger losses.

It was behind a stock market boom that sent the Shanghai bourse up 150% in 12 months, before it plummeted from last June after regulators moved to tighten rules on the practice.

Authorities have since spent vast sums to prop up share prices, in an intervention that raised questions about their commitment to market forces.

China Securities Finance (CSF), a state-backed agency offering funding services to brokerages for margin trading, cut the interest rates it charges, its website showed, which will make borrowing cheaper for investors if stockbrokers pass on the savings.

CSF - a key part of the "national team" that has bought stocks on the government's behalf - also started offering brokerages short-term loans, on top of the six-month terms previously available.

"The loosening could reignite interest in the equity market, particularly as the regulators' actions last year - to rein back private sector broker leverage - helped trigger the correction in equity prices," Koon Chow, senior macro and currency strategist at Union Bancaire Privee in London, told Bloomberg News.

"It does look like they want a second chance at growing the equity market."

The benchmark Shanghai Composite Index was 42.8% lower than the mid-June peak at last Friday's close.

It rose 2.15% on Monday as investors welcomed the change.

China's central bank governor Zhou Xiaochuan told a forum on Sunday that Beijing expects more companies to seek equity funding to reduce their reliance on loans, according to the official Shanghai Securities News.

The world's second-largest economy grew at its slowest pace in a quarter of century last year and Beijing has cut its 2016 expansion target to 6.5% to 7%.

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
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent-ruolie
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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