Fri, Jun 26, 2015 - Page 13 News List

Chinese stocks plunge as margin debt levels drop

Bloomberg

China’s stocks yesterday slumped in volatile trading, led by technology companies, after traders sold shares purchased with borrowed money for a third day.

The Shanghai Composite Index slid as much as 4.4 percent in the last hour of trading, sending a gauge of 30-day volatility to a seven-year high.

All 10 industry groups in the CSI 300 Index dropped, with a sub-index of technology companies plunging 6.3 percent for the biggest loss. Beijing Shiji Information Technology Co (石基信息) and Hundsun Technologies Inc (恒生電子) both fell by the 10 percent daily limit.

The Shanghai Composite tumbled 3.5 percent to 4,527.78 at the close, erasing a gain of 0.7 percent and snapping a two-day, 4.7 percent advance. The gauge had last week posted its biggest loss since the global financial crisis on concern valuations had risen to unsustainable levels and a flood of new share sales were sucking funds from existing equities.

“The market is still in a correction mode,” said Dai Ming, a fund manager at Hengsheng Asset Management Co in Shanghai. “Some investors have pretty high leverage and they need to cut their positions, even if there’s some light selling in the market.”

The CSI 300 Index lost 3.6 percent. Hong Kong’s Hang Seng China Enterprises Index fell 1.6 percent at 3:30pm, while the Hang Seng Index dropped 0.9 percent.

The decline in margin trading, in which investors borrow money to buy securities, comes as pressure grows on regulators to take measures to avoid a stock market crash.

This month, the China Securities Regulatory Commission said brokerages’ margin lending should be capped at four times their net capital.

Strategists at BlackRock Inc, Credit Suisse Group AG and Bank of America Corp last week all said that Chinese equities are in a bubble. The median stock on mainland exchanges is valued at 95 times earnings — higher than when the market peaked in October 2007.

The CSRC gave written approval for 28 IPOs, it said on Wednesday. Ten companies would list on the Shanghai Stock Exchange and the other 18 on the Shenzhen bourse, it said.

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