China Stocks Sink Most Since 2008 on Margin-Trading Suspensions
2015-01-19 06:03:01.609 GMT
By Bloomberg News
(Bloomberg) -- Chinese equities plunged the most in six
years, led by brokerages, after regulatory efforts to rein in
record margin lending sparked concern that speculative traders
will pull back from the world’s best-performing stock market.
The Shanghai Composite Index sank 7.1 percent to 3,138.59
at 1:59 p.m. local time, poised for the steepest drop since June
2008. Citic Securities Co. and Haitong Securities Co., the
nation’s two biggest listed securities firms, fell by the 10
percent daily limit after they were suspended from lending money
to new equity-trading clients. Industrial & Commercial Bank of
China Ltd. tumbled 9.7 percent. The stock gauge’s 30-day
volatility rose to a five-year high.
The penalties have raised concern that policy makers are
trying to curb a surge in stock purchases using borrowed money,
after outstanding margin loans surged to 1.08 trillion yuan
($174 billion) as of Jan. 13 from about 400 billion yuan at the
end of June. The Shanghai Composite index has jumped 61 percent
during the past 12 months on record volumes as individual
investors piled into the market.
“Regulators are concerned that shares have run too hard,
too fast,” said Hao Hong, a strategist at Bocom International
Holdings Co. in Hong Kong. “They want a measured increase in
the stock market. After all, margin financing is one of the
reasons for people to be bullish on brokerage stocks, and these
stocks have run particularly hard.”
The Shanghai measure advanced 2.8 percent last week, a 10th
week of gains that’s the longest winning streak since May 2007,
after credit growth expanded and speculation grew the central
bank will cut reserve-requirement ratios.
Margin Suspensions
About seven shares fell for each that rose on the Shanghai
stock gauge today, as an index of financial companies tumbled by
a record. The Hang Seng China Enterprises Index of mainland
shares traded in Hong Kong sank 5.2 percent, while the Hang Seng
Index fall 1.5 percent.
Citic Securities, Haitong Securities and Guotai Junan
Securities Co. were suspended from lending money and stocks to
new clients for three months, the China Securities Regulatory
Commission said on its microblog on Jan. 16 after the market
closed.
The regulator punished nine other brokerages for offenses
including allowing unqualified investors to open margin finance
and securities lending accounts, it said. On the same day, the
China Banking Regulatory Commission banned banks from lending to
companies that borrow to invest in equities, bonds, futures and
derivatives. So-called entrusted loans extended by banks
increased to about 458 billion yuan in December, the most since
data became available in 2012.
Record Plunge
“China is trying to rein in over-bullishness in the stock
market as moves have been exaggerated,” Pauline Dan, Hong Kong-
based head of Greater China equities at Pictet Asset Management
Ltd., said by phone. “Investors will have to wait and see until
this volatility settles. They don’t have a fundamental reason to
stay long since government policy is driving the market.”
The CSI 300 financial index tumbled 9.5 percent, heading
for a record loss, according to Bloomberg data going back to
July 2007. Ping An Insurance Group Co., China Minsheng Banking
Corp. and China Merchants Bank Co. all fell by the daily limit.
Other large-cap stocks also slumped, with PetroChina Co. falling
7.8 percent and Agricultural Bank of China Ltd. dropping 9.9
percent.
Minimum Requirement
Citic said in a stock filing today that it raised the
minimum requirement for opening margin lending accounts to
500,000 yuan from 300,000 yuan.
In a margin trade, investors use their own money for just a
portion of their stock purchase, borrowing the rest from a
broker. The loans are backed by the investors’ equity holdings,
meaning that they may be forced to sell when prices fall to
repay their debt. Huatai Securities advertised margin lending
rates of 8.6 percent on its website today.
Small-cap stocks are among the favorites of margin traders,
Yu Liang, an analyst at Deutsche Bank AG, wrote in a Jan. 5
report. Beijing-based Sumavision Technologies Co., which makes
and sells digital TV software and hardware products, has $238
million of shares bought on margin, or 17 percent of its market
capitalization, according to the report. Xuzhou Combustion
Control Technology Co. has $112 million or 23 percent of the
stock’s market value.
Other companies include Shanghai Duolun Industry Co. and
Zhejiang Jianfang Group Co., the Deutsche report shows.
Economic Figures
China is scheduled to release data tomorrow that’s forecast
to show the economy grew in the fourth quarter at the slowest
quarterly pace since 2009.
The nation’s gross domestic product growth probably
weakened to 7.2 percent in the October-to-December period,
according to the median estimate in a Bloomberg survey. The
economy grew 7.3 percent a quarter earlier. Economic expansion
may reach 7.3 percent this year, the Xinhua News Agency reported
over the weekend, citing central bank adviser Song Guoqing.
China Vanke Co. and Poly Real Estate Group Co. slid more
than nine percent. The nation’s new-home prices fell in 65 of
the 70 cities monitored and were unchanged in four last month,
the National Bureau of Statistics said in a statement yesterday.
That compares with declines in 67 cities in November.
The Shanghai Composite is the best performer among 93
global indexes tracked by Bloomberg over the past year with a 67
percent gain. The index was valued at 12.6 times 12-month
projected earnings last week, the highest level since April
2011, according to data compiled by Bloomberg.
For Related News and Information:
Bitauto Posts Weekly Drop on Dilution Concern: China Overnight
Shenzhen Home Prices Rebound After China Rate Cut Boosts Demand
China Suspends 3 Big Brokers From Adding Margin-Trading Accounts
Chinese stocks stories: TNI CHINA STK <GO>
Global stocks stories: TOP STK <GO>
World equity valuations: WPE <GO>
--With assistance from Jonathan Burgos in Singapore and Jun Luo
in Shanghai.
To contact Bloomberg News staff for this story:
Zhang Shidong in Shanghai at +86-21-6104-3040 or
szhang5@bloomberg.net;
Kyoungwha Kim in Hong Kong at +852-2977-2104 or
kkim19@bloomberg.net
To contact the editors responsible for this story:
Michael Patterson at +852-2977-4820 or
mpatterson10@bloomberg.net
Richard Frost
2015-01-19 06:03:01.609 GMT
By Bloomberg News
(Bloomberg) -- Chinese equities plunged the most in six
years, led by brokerages, after regulatory efforts to rein in
record margin lending sparked concern that speculative traders
will pull back from the world’s best-performing stock market.
The Shanghai Composite Index sank 7.1 percent to 3,138.59
at 1:59 p.m. local time, poised for the steepest drop since June
2008. Citic Securities Co. and Haitong Securities Co., the
nation’s two biggest listed securities firms, fell by the 10
percent daily limit after they were suspended from lending money
to new equity-trading clients. Industrial & Commercial Bank of
China Ltd. tumbled 9.7 percent. The stock gauge’s 30-day
volatility rose to a five-year high.
The penalties have raised concern that policy makers are
trying to curb a surge in stock purchases using borrowed money,
after outstanding margin loans surged to 1.08 trillion yuan
($174 billion) as of Jan. 13 from about 400 billion yuan at the
end of June. The Shanghai Composite index has jumped 61 percent
during the past 12 months on record volumes as individual
investors piled into the market.
“Regulators are concerned that shares have run too hard,
too fast,” said Hao Hong, a strategist at Bocom International
Holdings Co. in Hong Kong. “They want a measured increase in
the stock market. After all, margin financing is one of the
reasons for people to be bullish on brokerage stocks, and these
stocks have run particularly hard.”
The Shanghai measure advanced 2.8 percent last week, a 10th
week of gains that’s the longest winning streak since May 2007,
after credit growth expanded and speculation grew the central
bank will cut reserve-requirement ratios.
Margin Suspensions
About seven shares fell for each that rose on the Shanghai
stock gauge today, as an index of financial companies tumbled by
a record. The Hang Seng China Enterprises Index of mainland
shares traded in Hong Kong sank 5.2 percent, while the Hang Seng
Index fall 1.5 percent.
Citic Securities, Haitong Securities and Guotai Junan
Securities Co. were suspended from lending money and stocks to
new clients for three months, the China Securities Regulatory
Commission said on its microblog on Jan. 16 after the market
closed.
The regulator punished nine other brokerages for offenses
including allowing unqualified investors to open margin finance
and securities lending accounts, it said. On the same day, the
China Banking Regulatory Commission banned banks from lending to
companies that borrow to invest in equities, bonds, futures and
derivatives. So-called entrusted loans extended by banks
increased to about 458 billion yuan in December, the most since
data became available in 2012.
Record Plunge
“China is trying to rein in over-bullishness in the stock
market as moves have been exaggerated,” Pauline Dan, Hong Kong-
based head of Greater China equities at Pictet Asset Management
Ltd., said by phone. “Investors will have to wait and see until
this volatility settles. They don’t have a fundamental reason to
stay long since government policy is driving the market.”
The CSI 300 financial index tumbled 9.5 percent, heading
for a record loss, according to Bloomberg data going back to
July 2007. Ping An Insurance Group Co., China Minsheng Banking
Corp. and China Merchants Bank Co. all fell by the daily limit.
Other large-cap stocks also slumped, with PetroChina Co. falling
7.8 percent and Agricultural Bank of China Ltd. dropping 9.9
percent.
Minimum Requirement
Citic said in a stock filing today that it raised the
minimum requirement for opening margin lending accounts to
500,000 yuan from 300,000 yuan.
In a margin trade, investors use their own money for just a
portion of their stock purchase, borrowing the rest from a
broker. The loans are backed by the investors’ equity holdings,
meaning that they may be forced to sell when prices fall to
repay their debt. Huatai Securities advertised margin lending
rates of 8.6 percent on its website today.
Small-cap stocks are among the favorites of margin traders,
Yu Liang, an analyst at Deutsche Bank AG, wrote in a Jan. 5
report. Beijing-based Sumavision Technologies Co., which makes
and sells digital TV software and hardware products, has $238
million of shares bought on margin, or 17 percent of its market
capitalization, according to the report. Xuzhou Combustion
Control Technology Co. has $112 million or 23 percent of the
stock’s market value.
Other companies include Shanghai Duolun Industry Co. and
Zhejiang Jianfang Group Co., the Deutsche report shows.
Economic Figures
China is scheduled to release data tomorrow that’s forecast
to show the economy grew in the fourth quarter at the slowest
quarterly pace since 2009.
The nation’s gross domestic product growth probably
weakened to 7.2 percent in the October-to-December period,
according to the median estimate in a Bloomberg survey. The
economy grew 7.3 percent a quarter earlier. Economic expansion
may reach 7.3 percent this year, the Xinhua News Agency reported
over the weekend, citing central bank adviser Song Guoqing.
China Vanke Co. and Poly Real Estate Group Co. slid more
than nine percent. The nation’s new-home prices fell in 65 of
the 70 cities monitored and were unchanged in four last month,
the National Bureau of Statistics said in a statement yesterday.
That compares with declines in 67 cities in November.
The Shanghai Composite is the best performer among 93
global indexes tracked by Bloomberg over the past year with a 67
percent gain. The index was valued at 12.6 times 12-month
projected earnings last week, the highest level since April
2011, according to data compiled by Bloomberg.
For Related News and Information:
Bitauto Posts Weekly Drop on Dilution Concern: China Overnight
Shenzhen Home Prices Rebound After China Rate Cut Boosts Demand
China Suspends 3 Big Brokers From Adding Margin-Trading Accounts
Chinese stocks stories: TNI CHINA STK <GO>
Global stocks stories: TOP STK <GO>
World equity valuations: WPE <GO>
--With assistance from Jonathan Burgos in Singapore and Jun Luo
in Shanghai.
To contact Bloomberg News staff for this story:
Zhang Shidong in Shanghai at +86-21-6104-3040 or
szhang5@bloomberg.net;
Kyoungwha Kim in Hong Kong at +852-2977-2104 or
kkim19@bloomberg.net
To contact the editors responsible for this story:
Michael Patterson at +852-2977-4820 or
mpatterson10@bloomberg.net
Richard Frost