Chinese Stock market Futures Limit-Down After Regulatory Crackdown On Margin-Trading
- *SHANGHAI COMPOSITE HEADS FOR BIGGEST LOSS SINCE FEBRUARY 2007
- *CHINA CSI 300 INDEX FUTURES FALL BY 10% LIMIT
Who could have seen this coming?
Having tried and failed once to stem the speculative frenzy in Chinese stocks, regulators took more direct action tonight and suspended three of the biggest securities firms from adding margin-finance and securities lending accounts for three months following rule violations. As Bloomberg reports, Citic Securities, Haitong Securities, and Guotai Junan Securities shares plunged dragguing the entire Shanghai Composite down almost 7% and negative year-to-date.
As Bloomberg adds,
Regulators may have been concerned that stock gains, partly driven by margin financing, are too rapid, according to Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. The move came after the Shanghai Composite Index surged 63 percent in six months and brokers including Citic and Haitong announced plans to raise more money to lend to clients.
“Brokerage shares are likely to get hit,” Hong said before the market opened today. “After all, margin financing is one of the reasons for people to be bullish on brokerage stocks, and these stocks have run particularly hard.”
Citic and Haitong, the nation’s biggest brokers by market value, announced plans for share sales that will help fund an expansion of businesses including margin financing. Those two and Guotai Junan were the three largest by assets in a 2013 ranking by the Securities Association of China.
“The regulators are doing this to cool down the stock market,” said Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong. “Stock market sentiment will definitely go down.”
In addition, China’s currency was sold hard out of the gate – testing 6.2250, its weakest level against the USD this year.