Lower margin fund cost lifts shares
Print Edition
SHANGHAI shares closed above 3,000 points yesterday for the first time in two months as China eased controls on margin lending.
The Shanghai Composite Index added 2.15 percent to end at 3,018.8 points yesterday, rising for a seventh trading day.
Investors were cheered after China Securities Finance Corp said it will resume lending funds at five different maturities to securities firms at lower rates, starting yesterday, a move that analysts said could provide more liquidity in the market and boost investor sentiment.
The reduction in margin lending costs signaled that regulators have deemed the leverage level in the market as “reasonable” or even “relatively low,” said Guosen Securities, adding that such a move will help assure investor confidence.
Margin trading, where investors borrow money from brokerages to buy stocks, has been blamed for bringing up leverage during market swings last summer.
Since then, the balance for margin lending outstanding has been declining by more than half before recovering slightly in recent times.
“The cut indicated that the market may have bottomed out in terms of liquidity, and we should not be very bearish on where it’s going,” Guosen Securities said.
Brokerages surged, with Citic Securities Co jumping by the 10 percent daily limit to 18.65 yuan (US$2.88). The other 13 Shanghai-listed securities brokerages all soared more than 9 percent.
Sentiment was further lifted by positive signals coming from Zhou Xiaochuan, governor of the People’s Bank of China, who mentioned the importance of supporting the stock market six times in his speech over the weekend.
Hundson Technologies Co surged by the daily 10 percent cap to 56.99 yuan.
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